Rapid price hikes see shoppers opting for discounted goods

Shoppers in a supermarket.
Shoppers in a supermarket. Source: Ken Mürk/ERR

The main culprit behind rapid inflation is high energy prices, however some internal factors have also helped boost inflation in Estonia to the EU's fastest. A clear pattern of consumers opting for discounted products had emerged in June already.

Bank of Estonia economist Kaspar Oja noted that the Estonian economy had recovered rapidly enough from the COVID-19 pandemic crisis, and the country's economic situation was fairly strong by the end of last year.

"At the same time, the budgetary stimulus has continued to remain in the economy," he continued. "And money released from pension funds reached the economy fairly recently, and more has apparently continued to reach it in the following months."

Oja believes that price increases will really start to impact consumption in the second half of the year.

"We initially thought that it would start strongly reducing consumption; recent data, however, indicates that that's not how things have gone," he said. "People have begun spending more financially; there hasn't been a significant blowback in consumption yet. I believe that a greater impact will arrive this fall and winter, when new heating bills start coming in that are even bigger than last winter's."

Nonetheless, retailers confirm that they've already noticed changes to consumer behavior.

"It wasn't as noticeable during the first few months of high inflation, but June may be the first month in which patterns have more clearly changed," said Kristjan Anderson, director of business accounting at supermarket chain Selver. "If you look at how the proportion of discounted goods has changed in people's shopping carts, it's reached a record level — nearly 40 percent. That's not typically the case in June."

The same tendency applies at the pump as well.

"High fuel prices have impacted consumption, and first and foremost in rural areas," said Risto Sülluste, marketing and communications director at fuel retailer Neste Eesti.

"If we compare the current situation with that of the same time last year, we're seeing a decrease of 8-10 percent in Harju County, and 10-12 percent in rural areas with more price-sensitive consumers," he noted.

As gasoline and diesel fuel prices have begun falling on the global market, Estonian fuel retailers followed suit and dropped prices at their gas stations on Thursday morning, reducing the price of 95 octane gas to €2.049 per liter and diesel to €1.949 per liter.

In U.S. dollars per gallon, this equals $7.91 for 95 octane gas and $7.53 for diesel.

98 octane gas, meanwhile, fell to €2.099 per liter, or $8.10 per gallon.

Sugar is crucial to the current jam-making season in Estonia. Source: Siim Lõvi/ERR

Jam season: sugar sales up, prices to follow

The arrival of jam-making season in Estonia means stocking up on sugar. While this year has been extraordinary due to the war in Ukraine, as a result of which people began stocking up on sugar in March and April already, retailers warn that significant price increases yet lay ahead.

According to Tõnis Tomingas, assortment and purchasing director for Prisma Peremarket, June saw a significant increase in not just regular, granulated sugar but also jam sugar as well. While the latter is more expensive, many jam makers prefer it due to its unique properties that make it especially suitable for jam-making.

"Sugar purchases traditionally always go up when [Estonian] strawberries ripen — that's when the preserves season begins," Tomingas explained. "We're seeing that same trend this year as well."

The purchasing director cited daily Postimees' July grocery bill review, according to which sugar was cheapest — at €0.59 per kilogram — at Prisma.

He noted that the chain's June sugar sales had increased significantly on year, "Apparently due to both such a cheap price and the expansion of the Prisma chain of stores."

Grossi Toidukaubad commercial director Eve Heinsaar and a representative of Lidl likewise confirmed that sugar sales have gone up in recent weeks, and volumes don't look likely to fall anytime soon.

"We have indeed noticed clients' increased interest in sugar in connection with the start of the preserves season," the Lidl representative said. "Comparing the last few weeks, sugar sales at our stores have nearly doubled. The price of sugar, however, has remained stable at our stores."

Heinsaar, meanwhile, noted that sugar sales had increased since the beginning of Russia's full-scale invasion of Ukraine in late February, and have not increased as significantly since. Grossi supermarkets have sold some 300 tons of sugar in the past two months.

"Sugar purchase prices have already increased closer to 60 percent," Heinsaar explained, adding that Grossi stores are currently selling sugar at a loss due to stiff competition. "A significant increase in the price of sugar lies yet ahead," she warned.

Selver communications director Rivo Veski told ERR that they have seen a decrease in sugar sales, despite sugar purchases typically starting to go up in June already.

Veski believed this could be the result of two factors: people still consuming sugar they had bought in bigger quantities in February and March, and the increase in price, which most recently stood at 12 percent.

"Jam sugar sales haven't picked up steam yet," he added.

According to a Prisma representative, the price of sugar has been impacted primarily by the general inflationary economic environment. The purchase price of sugar has increased 25-35 percent.

Talis Raak, head of purchasing at Rimi, said that the price of sugar is currently being affected the most by the increase in electricity and fuel prices.

"It's natural to stock up more on sugar during preserves season," Raak said. "That has always been the case, and there has been nothing particular to note in that regard this year either. Sugar sales have increased in the middle of summer during previous years as well; so they have this year as well."


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Editor: Aili Vahtla

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