In Russia, prices for food and equipment began to decline
Apr 20, 2022

In Russia, prices for food and equipment began to decline

After a sharp jump in prices in March, retail chains began to rewrite price tags in the opposite direction. Laptops and tablets have already fallen in price by almost a quarter, and washing powders - by 15%. The reason is the drop in demand and the strengthening of the ruble. But manufacturers are not yet ready to seriously reduce prices - the cost of raw materials, packaging, logistics continues to grow.

According to Rosstat, in the first week of April, the price growth for most goods slowed down significantly, and prices for some products decreased markedly. For example, tomatoes (5.3%) and cucumbers (5%) have sharply fallen in price. Although at this time of the year, vegetables, on the contrary, are growing strongly in price: their harvest is over, expensive imports remain in stores. Even imported bananas fell by 4.8% in a week. Experts say that the cost of zucchini and eggplant has fallen by almost one and a half times. Sugar, which was swept off the shelves a couple of weeks ago, has almost stopped getting more expensive: the growth was 0.9% against 5.8% a week earlier, and before that - by more than 10% in a week. The decrease in demand for food in the Ministry of Industry and Trade was noted in early April. The population bought sugar and cereals for many years to come. Retail chains began to restore their stocks to the usual thirty days.  Rossiyskaya Gazeta was told about the stabilization of demand for goods (especially groceries) in Magnit, Lenta, Ozon, and Platypus. For example, Ozon notes a significant reduction in prices in electronics and consumer goods. Laptops and tablets have become 22% cheaper. Everyday goods, among which laundry and personal hygiene products are especially popular, fell by 15% on average.  Against the background of declining demand, as well as the strengthening of the ruble, Magnit is already "negotiating with suppliers to reduce purchase prices, and is also discussing with partners the return of discount promotions and promos," the company said.  Ozon claims that they have kept large sales and returned the "Best Price Zone" section, where promotional products in all categories are collected. Now this section is particularly popular, because in conditions of declining incomes, the population is trying to save even more, looking for the most favorable offers and buying goods through promotions. Lenta also says that they "continue to work with partners on the best offers." However, they note that many players have postponed investments in the promo for the fall.  Russian manufacturers have been working at a loss for more than a month, says Dmitry Leonov, deputy chairman of the Board of the Rusprodsoyuz Association. According to him, producers pay for raw materials, logistics and other expenses at new (increased) prices.  Retail is negotiating with suppliers to reduce prices. Laptops and tablets have already fallen in price by 22%, everyday goods - by 15%. At the same time, suppliers receive payment from retail chains for the same orders a month after the sale of goods from the shelf and at the old prices, since price adjustments following the previous increase in the exchange rate of the network have not yet been fully accepted. And the cost of raw materials, transport and other components of the cost price, despite some strengthening of the ruble, have not decreased or continue to grow, emphasizes Leonov.  "In such a situation, due to the unprecedented shortage of working capital, manufacturers simply do not have the ability to quickly reduce shipping prices at the expense of their own resources following the currency dynamics," the expert says.  For the same reason, suppliers are forced to optimize business processes, including refusing to conduct promotions. According to Nielsen, since the beginning of 2022, by March 20, discounts in 59% of product categories have decreased to five percentage points, in 13% - by 5-15 percentage points. Dmitry Leonov says that the situation is still difficult and may even lead to a shortage of individual goods if the networks do not agree to the proposals of suppliers to stabilize the situation. Among these proposals are a moratorium on fines, a reduction in the time for consideration of price changes, a reduction in the deferred payment period, and others.  Similar proposals on softening conditions for suppliers were recently sent to the Ministry of Industry and Trade by Deputy Chairman of the State Duma Alexey Gordeev. He proposed to temporarily reduce the payment period for the delivered products (from one to two months to 5-10 days, depending on the shelf life of the goods). This will help to avoid supply disruptions in the future.  "Due to the increasing sanctions pressure, most economic entities are now working in conditions of uncertainty. The State Duma receives appeals from food producers who are faced with a rise in the price of working capital. At the same time, they need to ensure uninterrupted operation, rhythmic supply of goods to retail chains, preserve jobs and price stability," the deputy said.  He acknowledged that the government has already taken a number of measures, including to reduce administrative pressure on business. In his opinion, this is the "right signal to the economy": producers of goods and trade-conducting systems should also be loyal to each other.  In retail chains, Rossiyskaya Gazeta was assured that they were ready to make concessions to suppliers.  "We understand that many of our partners are experiencing temporary difficulties with the regularity of deliveries of goods, as well as raw materials and packaging for their production. In this regard, we are ready to revise the terms of cooperation with bona fide partners in terms of issuing fines for non-delivery of goods, reducing the timing of changes in purchase prices and payment for goods," Lenta reported.  But the retail network expects that the partners will also fulfill their obligations. By joint efforts, it will be possible to protect consumers from a sharp jump in retail prices and a decrease in product quality, Lenta hopes.  Product suppliers are asking retail chains to speed up payment for goods. This will help to avoid supply disruptions Due to the current market situation and the presence of objective difficulties for partners, Magnit has revised its approaches to the requirements for suppliers to fulfill their obligations under contracts. The network claims that it does not apply fines to partners if they are unable to fulfill their obligations under the contract due to force majeure, including economic circumstances.  In addition, the company is ready to waive fines if 90% of deliveries are completed without violating obligations. The network also halves the amount of the fine if the delay in the delivery of goods with an expiration date of more than 30 days does not exceed five working days.

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