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Rally cycle and turmoil for supermarkets and food industry

By George Lampiris

A new round of concentration, which will be strong and will affect the food industry sector and the shorter-range supermarket chains, is expected by high-ranking market executives, contacted by Capital.gr. At the same time, the same estimates do not exclude padlocks on companies that will not be able to withstand the strong inflationary pressures and the increased costs of the period we are going through. In the case of supermarkets, in the first quarter of 2022, the measurement company Nielsen has announced that sales in turnover in organized retail were reduced by 3.5% at the level of stores. At the same time, in terms of sales of fast-moving consumer goods in terms of value, the decline in the first quarter amounted to -1.4%. Forecasts from executives related to the supermarket sector speak of a further contraction in sales in April, estimating that the percentage reduction in stores can reach even -4.5%. To this number if we add food inflation, which exceeds 5%, the impact is even more pronounced during the reporting period.

The pressures for the small and medium supermarkets are more intense

Regarding the smaller supermarket chains – the same does not apply to the large groups – the pressure scenario is intensifying, after a two-year pandemic of 2020 and 2021, where the total of organized retail in Greece significantly increased its sales. However, there were many small or medium-sized enterprises with marginal lower balance sheets, which were somewhat discouraged due to the increased demand brought by COVID-19. However, now, they are facing turmoil brought by inflation and, as we are informed, sooner or later there will be a rearrangement of the scene at this level of the market.

Restriction of offers on the shelves

At the same time, while most consumers are seeking refuge in supermarkets as compensation for price increases, they are being implemented at a slower pace than in the pre-crisis period, according to Stelios Sarantis, a member of the board of the Hellenic Dairy Group. . In the dairy sector, all categories are declining in terms of consumption. Fresh milk and strained yogurt are mainly affected, the juices are also slightly declining and a little more intense – although also in single digits. In terms of a rising category of recent years produced by the dairy industry, herbal drinks, retail prices amount to around 3 euros per liter and in the last ten days there is a cycle of offers that reaches even 0.60 euros per liter in order to contain demand.

According to Mr. Sarantis, other increases are expected on the dairy shelf. Most companies, however, are moving in single-digit increases to most dairy products, with the exception of cheese products. According to him, an effort is being made to absorb as much of the change in prices as possible from the dairy industry. On the contrary and in contrast to other dairy products feta has increased by 35% compared to a year ago, influenced by factors such as packaging materials, energy and the basic raw material, goat’s and sheep’s milk, the price of which reaches 1 , 28 euros per kilo for sheep and 0.80 euros for goats. In other products the increases range from 3% to 5% (milk, yogurt, juices and vegetables), while the increased cost according to the businessman amounts to at least 15%.

Even profitable companies are moving towards negative balance sheets

The picture given by Platon Marlafekas, president of the Achaia Chamber and vice-president of the soft drink industry, Lux, is that 64% of last year’s balance sheets showed either zero profit for 19% of companies, or negative results for the remaining 81% of these companies from the above 64%. According to Mr. Marlafekas in the industrial sector, the additional costs for the company range between 10% -15% of the turnover, provided that they have maintained stable sales during the pre-crisis period. This year, many business entities can declare a “red” balance sheet, even those that are traditionally profitable and financially sound in recent years. When industrial profit is usually in single digits, reaching a maximum of 10%, it is unsustainable under the weight of existing inflationary pressures. At the same time, consumers are asking for cheaper products, not more expensive ones. “As a matter of fact, we are talking about big reshuffles and mainly about the 64% of the companies I mentioned above, which has no profit margin or has not accumulated profits from previous years to withstand the pressures”.

Another point on which it stands is the fact that companies that are in the process of investing and, for example, have been included in the provisions of the development law, are called upon to increase the budgeted expenditure due to increased costs.

“Downhill” for consumer confidence in April

It is noted that based on the economic situation survey of IOBE, the economic climate index in April stood at 105 points at the lowest level of the last twelve months and significantly lower than the 112.1 points in March. Also during April, the consumer confidence index fell to -55.3 points from -51.4 points in March and much lower compared to -38.4 points a year ago and at a lower level than August 2017.

Source: Capital

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