Maya Manolova, head of Bulgaria's consumer protection commission (KZP), is confusing price indices with retailers' mark-ups and profits, the Modern Trade Association (SMT) says. In a written statement, the association challenged her claim that the mark-up on some dairy products in big supermarket chains is above 140%.
This article follows our earlier report on the KZP inspection, in which Manolova cited a mark-up of 141% on butter and 133% on cheese in one inspected chain.
SMT says the most common mistake in public debate is mixing up indices with mark-ups or profits. Eurostat measures comparative price levels, not mark-ups, and the EU average is set at 100. An index of 140 for a product means it costs 40% more in Bulgaria than the EU average. It does not mean the product carries a 140% mark-up or a 140% profit.
The association cites Eurostat data. Bulgaria ranks last in the EU for the overall price level of goods and services, at 62.5% of the EU average. For food, the index is 92.6%, below the average. Bread and cereals are at 81.4% of the EU average, or 18.6% cheaper. Meat is at 71.5% of the average, or 28.5% cheaper. Fish is at 87.1%, or 12.9% cheaper.
A mark-up is not profit, SMT stresses. A shop uses that money to pay VAT, electricity, transport, wages and the cost of discarded goods. After these costs, including refrigerated transport, retailers are left with about 3% net profit, the association says. It also argues that the high VAT on food pushes up the price at the till.
On butter, SMT points to imports. Bulgarian production covers only 10% of demand, while 90% comes from abroad. The price of imported butter is set on international exchanges, and transport and storage costs are added on top.
The association put a series of questions to KZP. It wants to know how many products were inspected and for how many of them a 150% mark-up was found. It also asks what the lowest mark-ups are on basic goods in the chains, and why the commission announces only the highest single figure rather than the mark-ups on the other inspected products.
SMT also asks whether people are told that a mark-up is not profit, and why the comparison with Europe leaves out the effect of Bulgaria's 20% VAT. Another question is why only the last link, the shop, is inspected. The association also wants to know whether KZP has looked at the rise in wages (+88.5%) and production costs (+68.3%) at food processors.
If structural problems in Bulgarian production make food more expensive, small shops in traditional retail are also forced to sell at higher prices, SMT says. The association asks why the problem is then presented only as a feature of the big chains or a violation by them.
SMT backs penalties for proven violations. In its view, the inspections do find violations, but naming offenders in public and administrative pressure do not bring down prices in the shops.
The association also disputes the claim that the chains hold more than 70% of the food market, saying no official statistics confirm it. According to the National Statistical Institute (NSI) and the Institute for Market Economics (IME), the big chains' share is just over 50%.