Food prices in Czechia expected to rise further next year
The high price of foodstuffs has been a major woe for Czech consumers in the past two years. And there seems to be no light at the end of the tunnel. In spite of a decrease in the VAT rate on food from 15 to 12 percent in January, retail chains have announced further price rises next year.
Two-digit inflation in 2022 made Czech consumers think twice about what they were putting in their shopping carts. According to statistics from that year Czechs were buying less food, and eating less dairy products, meat, eggs, fruit and vegetables. On the other hand they were consuming more bread, rice and lentils. The change in eating habits is ascribed to falling real wages and growing food costs.
Although inflation was, to some extent, brought under control, and the government’s tax amendment will see food products moved from the present 15 percent VAT rate to 12 percent in January of 2024, any hopes that this would be reflected in food prices on the market have been dashed.
Retail chains this week announced that due to significantly higher energy costs, increased transport costs and higher tolls, food prices would inevitably go up –on average by five to ten percent.
Agriculture Minister Marek Výborný, who had repeatedly assured Czechs that food prices would go down criticized both producers and retailers for the unwelcome development.
“I must say that I am deeply disappointed to hear this. I am familiar with production costs and wholesale prices and I know the problem is somewhere between manufacturers and retailers. Certain things are hard to understand – such as why producers say in advance that they will have to increase prices when they have record profits or why a retailer buys a kilo of carrots for nine crowns and sells them for 27.90 crowns.”
The chairman of the Association for Trade and Tourism, Tomáš Prouza, defended retailers saying they must react to the rising prices of food manufacturers:
"Suppliers have already announced that they will raise prices by five to ten per cent from January. When retailers promised to translate the lower VAT into food prices they did not know they would face higher energy, transport and other costs. All this has completely negated any benefits from the lower VAT."
Agriculture Minister Výborný has said that while he has no direct influence on food pricing he will try to exert indirect pressure. He said the Anti-Trust Office would investigate possible cartel agreements, and other suspicious practices.
Another issue on the table is why food products are so much more expensive in this country than they are in Germany and Poland.
Analysts point to the fact that, with its 10 million plus inhabitants, Czechia is a much smaller market and a lack of competition is to blame. And while no single food company or retail chain is in a monopoly position, there is a strong oligopoly in place i.e. a few major retailers who control the lion’s share of the market.