2023-08-10 15:57:12
Since the VAT reduction on basic foods came into force on January 1 to alleviate the inflationary crisis suffered by the sector, the Facua consumer association has denounced the large distribution chains every month for not correctly transferring these bonuses to their products, as evidenced by their monthly data collection.
However, these complaints are now on deaf ears after the highest competition authority, the CNMC, revealed on Thursday the conclusions of its study in which it ensures that “no indications of systematic problems or differences between areas have been detected.” geographical areas with a greater or lesser concentration of establishments”.
At the request of the Secretary of State for the Economy, the CNMC has carried out a study that analyzes how food distributors (supermarkets and hypermarkets, above all) have transferred the VAT reduction to the price of their products. In it, more than 60,000 retail prices have been collected, in addition to evaluating another five databases, such as the INE, the Ministry of Agriculture, Eurostat and various private consultancies.
Food distribution is a growing market, in which supermarkets cover 70% of the sales area. The study reviews the legal framework and the economic characteristics of the sector in Spain, and reviews previous studies on this matter. “In line with these, the CNMC finds no indication that the degree of competition in each geographical area significantly affects the transfer of the VAT reduction, since the latter also depends on other factors,” they indicate from the organization.
The ECB warns that food inflation could go higher in the coming months
Therefore, prices are rising but to a lesser extent than if this fiscal measure had not been adopted. Thus, the CNMC confirms that the food affected by the discount fell in price by 2% in January 2023 compared to a month earlier, while those that were not included in the measure rose by 1.8% in the same period. The European Central Bank (ECB) notes in its economic bulletin made public this Thursday that although costs are easing (especially energy), high food inflation “could be driven to a greater extent” in the coming months by the decision of Russia to break the Black Sea grain pact and due to extreme weather conditions in some countries, such as droughts or floods.
This same Friday, the INE will publish the definitive inflation data for the month of July, in which it will be possible to see if the CPI for food continues to moderate or picks up again. In June, food rose an average of 10.3%, while the general CPI stood at 1.9%.
Prices go up, habits change
Total spending on food by Spanish families was 74,500 million euros in 2021 -latest data available-, which is equivalent to 6.2% of GDP. Per person, Spaniards spend an average of 1,716 euros a year on food, the CNMC points out in its report, where it points out that spending on fresh products represented 42% of the total, with dairy and fruit as the two most important items in terms of volume, while meat and fish were the most relevant in terms of higher spending.
The problem with the rise in prices has been that the composition of the shopping basket has varied, with a lower weight of meat, fish, fruit and vegetables in 2022 compared to 2021. That is, as warned from the Ministry of Consumption, families are changing their consumption habits and worsening their food quality due to high prices.
And not only getting worse, but buying much less, and that food has traditionally been a fairly stable item because they are basic necessities. Data from the CNMC reveal that the total food consumption of Spaniards has decreased by 7% in volume in 2022 compared to the previous year. And with the latest data available for January 2023, a reduction of 1.8% is also observed compared to January 2022 in terms of volume, mainly due to the increase in the average price of food during that period by 13.7%. indicates the organism.
Oil and fish consumption plummets
The basic food categories that have seen their consumption reduce the most are oil, fish and flour, which are precisely the ones that have risen the most in prices. The data presented by the CNMC based on the analysis of the consultant Kantar indicate that the oil has risen more than 32% from January 2022 to January 2023 and its consumption has been reduced by almost 10%; and flour has become more expensive by 28% and its consumption has dropped by 10%.
This effect or change in consumer purchasing habits is called ‘downtrading’, a phenomenon that the CNMC explains occurs when households substitute higher-quality products for cheaper or lower-quality brands. “When ‘downtrading’ takes place, consumers choose to buy processed or canned foods instead of fresh products or to look for cheaper protein options, such as chicken meat instead of beef,” says the study.
This type of behavior is more common in times of economic uncertainty or high inflation, when households must adjust their budget to a greater extent in order to contain their level of spending on food, and it can have significant effects on the household shopping basket. , they explain from the CNMC.
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