Egg, fish and meat products produced in Latvia are priced higher than imported food – Gulbene district – Dzirkstele.lv

Egg, fish and meat products produced in Latvia are subject to an average higher mark-up at the stage of the retail supply chain than goods produced outside of Latvia, as well as deficiencies have been identified in the cooperation agreements of retailers with suppliers, concluded the egg, fish, milk, meat, grain survey carried out by the Competition Council (KP) and in the concluding section of the bakery products market research.

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KP calls on buyers, including retailers, not to abuse their purchasing power, to be vigilant and not to violate the fair trade practices stipulated in the Unfair Trade Practices Prohibition Act (NTPAL) towards their suppliers.

During market monitoring, KP found that doctor’s sausage, fresh chicken and fresh fish produced in Latvia are charged an average higher markup at the retail stage than equivalent goods produced outside of Latvia. For example, doktordesa produced in Latvia was on average 16% more expensive than doktordesa produced outside of Latvia. On the other hand, the markup applied to local fresh chicken at the stage of the retail supply chain has been on average 2.9 times higher compared to imported chicken.

Also, the KP study concluded that retailers priced certain local meat, egg and fish products cheaper on average than products produced outside of Latvia. Namely, during the considered period, fresh pork produced in Latvia was priced on average 1.6% cheaper than that produced outside of Latvia, while in the period from January to April 2022 and from April to May 2023, fresh pork produced in Latvia was priced 2.4 times more expensive than produced outside of Latvia.

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However, the observed differences in the markup of imported and local meat, egg and fish products are not as significant as KP found in previous studies for dairy products, bread and grain products.

At the same time, the KP market monitoring established that the purchase prices of private label products – fresh pork, doctor’s sausage, fresh chicken, eggs, fresh fish – produced by the manufacturer on the order of the retailer as a private brand product of the network, are significantly lower than the equivalent independent purchase of the manufacturer’s brand products prices.

KP points out that often the supplier produces both the retailer’s private label goods and at the same time the manufacturer’s independent brand goods, which are identical in composition. The production costs of such goods are equivalent, but their purchase prices differ significantly.

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It is at the production stage that the product forms all production, packaging and other costs, whereas at the retail stage, sales are ensured, where the costs associated with it are formed. However, KP found that an increasing proportion of the markup is formed precisely at the retail stage.

Consequently, retailers, taking into account their influence on the market, must be careful to treat their suppliers fairly in situations where the same supplier produces both independent brand goods and own-brand goods, which are also identical in composition. trade practices and would not engage in prohibited activities specified by NTPAL or activities that do not meet the requirements of good faith and honesty in transactions.

In the final part of KP market monitoring, all available contracts concluded between buyers of egg, fish, milk, meat, grain and bread products and their suppliers were analyzed.

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Analyzing the contracts submitted by buyers and suppliers, the KP found that in some of them, the buyers erroneously indicated the criteria for the settlement deadline for agricultural and food products. Therefore, KP invites buyers to set the date of delivery of goods and not the date of issuance or receipt of accompanying documents as the starting reference point for the payment term of agricultural and food products in the terms of contracts with suppliers.

KP established that buyers have the right to unilateral amendments to contracts when agricultural and food products of inadequate quality are delivered, when suppliers do not adequately fulfill their obligations and cannot prevent violations of contract provisions, as well as buyers have the right to unilaterally amend the price lists of marketing or marketing services.

At the same time, the KP calls on retailers to carefully evaluate the information provided to suppliers on procurement forecasts regarding new agricultural and food products unknown to consumers, in order to avoid cases of return of agricultural and food products and thus not to transfer economic risks to the supplier.

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In certain contracts, the KP found that, compared to suppliers of agricultural and food products registered outside Latvia, the contracts of suppliers registered in Latvia provide for significantly higher contractual penalties for non-compliance with quality and safety requirements and for violations of trade secret regulations.

KP calls on retailers to review the terms and amount of contractual penalties for non-compliance with quality and safety requirements and for violations of trade secret rules set out in contracts with suppliers of agricultural and food products registered in Latvia, in order to balance the economic risks between suppliers of agricultural and food products registered in Latvia and outside of Latvia.

Also, the KP reminds that in connection with the assessment of the proportionality of the amount of the contractual penalty in the daily cooperation of the market participants, they can use the self-assessment tool developed by the KP for buyers to evaluate fair trade practices and apply justified contractual penalties.