IELKA: The Formation of Final Product Prices in Supermarkets
Thursday, November 28, 2024
For the ten-month period of 2024, purchasing costs for products in Greek supermarkets - members of the Hellenic Supermarket Union (ESE), amounted to 63.4% of the final shelf price, according to a study by IELKA. Among the consolidated factors determining the final consumer price, VAT occupies the second-largest share, averaging 13.8%, based on the overall product mix on supermarket shelves, with some products at the 13% rate and others at the standard 24% rate. Considering that pre-tax profitability is just 1.3%, this perhaps reveals the full meaning of the statement by both the ESE president and general director that "the State’s percentage in the final price is quite significant" and why ESE would prefer VAT at the EU average.
The third-largest share in the final price is labor costs, which IELKA calculated at 10.1%, with an upward trend. Energy costs have risen to 2%, significantly higher compared to the previous decade.
Card Payment in Supermarkets
Other expenses are calculated at 1.3%, and - more importantly - other operational expenses are at 8.1%, which include bank transaction fees for card payments at the supermarket checkout. The percentage of card usage for final payment has long exceeded 70% and is geometrically approaching 80%. Card usage costs supermarket chains approximately 0.5% of their total annual turnover, as revealed by ESE’s general director, Apostolos Petalas. Of this, according to ESE, global card-issuing organizations receive about 0.26%. However, the IELKA study did not analyze the components of the high contribution of purchasing costs to the final product price.
Mr. Petalas noted that the level of purchasing costs relates to raw material supply, total production, supply chain issues, commodity prices, and final disposition to buyers. According to the IELKA study, from the 22.8% gross profit margin after VAT, which is enabled by the enhanced product purchasing costs, the net profitability of supermarkets reaches just 1%.
Konstantinos Vorilas
Source: FOODReporter October 25th 2024 #1299, page 5.