Bulgaria is not the first country to try to tame prices through an agreement with merchants. However, the question is who will pay the price, because it is clear that there is no free lunch. What can be expected? From Emilia Milcheva.
Bulgarian politician has long dreamed of commanding prices like a company of rookies. In 2013, Prime Minister Boyko Borisov failed to make electricity cheaper, but thirteen years later, Prime Minister Rumen Radev “suggested” to large retail chains to take care of Bulgarians with a basket of low-cost goods.
The “Basket with care” initiative started this week, embraced by retail chains, which are selling essential products, mainly from domestic producers, with discounts of 15% to 30%. These are mainly bread, yogurt and fresh milk, eggs, meat, cheese, fruits and vegetables, but also hygiene products. The commitment is for 6 months, but the German discounter Lidl announced an 8-month campaign.
Large retail chains hold between 55% and 65% of the FMCG market in Bulgaria and generate over 20 billion leva in annual revenue, according to a report by the Institute for Market Economics (IME) for 2024. Although hypermarkets are traditionally concentrated in cities, where nearly three-quarters of Bulgarians live, the expansion of retail parks in recent years has expanded their presence in smaller settlements.
Today, the vast majority of the population has easy access to at least one large retail chain, which turns every coordinated price campaign not just into a commercial action, but into an event with a tangible political effect.
The political economy of the basket
There is no free lunch, although politicians often promise it - because they do not pay with their own money. Therefore, the main question for “Basket with Care” is who will pay the price of this price reduction - will it be the retail chains or will they shift the burden onto suppliers and producers for lower purchase prices. The chairman of the industry chamber “Fruits and Vegetables” Tsvetan Tsekov reported signals from producers that they are being pressured by chains to reduce prices by 15% and more than 15% if they want their production to be purchased. The CPC is already investigating three such signals.
If the final price is pressured at the expense of the weakest participant in the chain - the producer, the consequences will not be measured by lower profits. Entrepreneurs can postpone investments, reduce wages, and also the quality of products - more water in sausages, more vegetable fats in dairy products, less content of more expensive ingredients.
The fears are not unfounded. In its market analyses, the CPC describes a whole system of bonuses, discounts, marketing fees, payments for shelf space, participation in promotions and other commercial terms that large chains negotiate with suppliers. Because of this, the question of whether the new discounts will be paid by the retailers themselves or will be transferred back along the chain sounds completely logical.
Profits from the discounts
For the authorities and the retail chains, the “Basket with Care” looks like a rare win-win operation. The managers get a visible result without spending on the budget. Radev reinforces the image of the General, before whose call for mobilization in the name of the people some of the largest foreign investors in Bulgaria stand peacefully.
The chains gain a public image of a socially responsible business, without facing price ceilings, new regulations or other forms of state intervention. Thus, the initiative becomes a convenient alliance between political and corporate interests, in which both sides benefit from the same message. So what if the action will not affect inflation? People will not measure its success by the consumer price index, but by the feeling that the state is finally on their side.
However, such campaigns shift the debate away from the problems in the Bulgarian food industry. Instead of the lack of investment and modernization and the low added value of production, the focus is once again on the prices on the shelves.
Lessons from Athens and Paris
At the end of 2023, Nikolay Denkov's cabinet tried a similar initiative under the motto "Affordable for you", which went almost unnoticed. Some of the chains did not participate at all, while others marked their participation with a sticker on the shelves. Two and a half years later, "Basket with Care" launched with far greater media noise, and the chains demonstrate visible readiness. However, greater noise is no guarantee of greater effect.
Bulgaria is not the first country to try to tame prices through negotiations with retailers. Greece tried a similar recipe back in 2022 with the so-called "Household Basket". Large chains were obliged to maintain at least 51 categories of basic goods at preferential prices, which were updated every week. The state created a special online platform for price comparison, and the products in the "basket" were marked with special labels.
But even then there was criticism that many chains included their cheapest private labels and small cuts, without making shopping significantly cheaper. The measure, intended as temporary, was repeatedly extended and exists in various forms today. According to the Greek daily newspaper “Kathimerini”, food in Greece is today, on average, about 22% more expensive than in 2022. In April, the Greek National Bank warned that such measures may have limited effect, because stores can reduce the prices of some products and at the same time compensate with others to maintain their overall profitability.
The basket survived, but inflation did not disappear
Greece was not an isolated case. In 2023, the French government negotiated with the large retail chains the so-called “anti-inflation quarter“, and the message was similar: the state shows that it is acting, and business - that it is cooperating.
This is also the political advantage of such initiatives. They rarely defeat inflation, but they create a sense of control over it. Once he convinces people that he can make food cheaper, the politician will inevitably be asked why he doesn't also make medicines, fuel, electricity cheaper... But the market is not a company of recruits on the market - and it does not follow orders.
This text expresses the opinion of the author and may not coincide with the positions of the Bulgarian editorial office and the State News Agency as a whole.