Russian retailers including Magnit, O’Key and Auchan Russia have said that they are voluntarily limiting margins on 'socially-important' products, such as bakery, dairy, sugar and some vegetables, at 5%.
Domestic news agency RIA Novosti said that the measure is being implemented to ensure that essential products are still affordable for everyday consumers amid rampant inflation and a declining rouble – factors that are likely to be exacerbated by the conflict in Ukraine.
Purchasing Power
“Current inflation rates affect the purchasing power of the population, especially for socially vulnerable categories of citizens," Magnit chief executive Jan Dunning commented. "We want to support these customers, so we are further limiting our margin on a number of socially important goods, making them even more affordable."
Magnit is limiting margins on 304 commodity items across 27 categories, it said, including beets, carrots, cabbage, potatoes, onions, milk, cottage cheese, kefir, butter, sugar and bread.
Back in January, retailers Magnit and Bristol agreed with Russia’s Federal Antimonopoly Service (FAS) to limit margins on 'socially-important' goods at 10%.
Elsewhere, X5 Retail Group last month announced it was limiting margins on 20 essential product categories, as well as compiling a list of specific SKUs on which margins would be adjusted on a monthly basis.
Socially-Important Products
Commenting on the move, Leonid Sinyutin, analyst with Sova Capital said, "The retailers’ decision should sustain the affordability of socially-important products for Russian citizens, in our view.
"We believe the 5% limit should have a minor effect on the profitability of Magnit and X5, as their diversified sales mixes (socially important products account for less than 5% of sales, on our estimates) and increasing share of private-label items should sustain their margins."
© 2022 European Supermarket Magazine – your source for the latest Retail news. Article by Stephen Wynne-Jones. Click subscribe to sign up to ESM: European Supermarket Magazine.
