Head of association: Food price advance to continue

Sirje Potisepp.
Sirje Potisepp. Source: Vladislava Snurnikova/ERR

Higher energy costs will continue to contribute to food price hikes, Sirje Potisepp, head of the Estonian Food Industry Association, told ERR. She urges the government to offer major food producers the same kind of support aimed at small enterprises and private consumers as Estonia's neighbors are supporting their companies.

"Food price advance will continue. It is not a nice thing to say, while it would also be a sin to lie. It continues in spite of companies," Potisepp told Vikerraadio on Wednesday.

She said that the energy crisis is turning into a food industry crisis and will go on to affect every other walk of life. "I have been forced to explain that prices are going up irrespective of Estonian producers in the past year," Potisepp said, pointing to the price of electricity, which is currently around 50-60 cents per kilowatt-hour.

"We expect more than what we have seen from the government," Potisepp continued. "The situation is extraordinary and it's times like these the government must intervene and offer solutions to those who have contributed to the state budget and continue to do so."

Potisepp said that the association proposed introducing price caps on electricity and gas months ago but has received not so much as a reply. The food sector is Estonia's biggest gas consumer, while it has already dialed back consumption by 40 percent," she added.

"Our companies have done well, but their investment capacity is very low as the sector is making a loss. A price cap on power and gas or access to the universal service, which was granted to micro and small businesses, would surely help," the association head said. "We need to bring down manufacturing costs through an effective industrial policy. In other words, the government must help and make sure industry has access to energy at affordable prices," she said, adding that tax breaks for energy-intensive companies would also help.

"How can our food producers compete with Latvian, Lithuanian, Polish, German and Swedish competitors that have strong state backing and crisis measures. I have no answer," Potisepp admitted.

She said that the association has not yet decided whether a VAT reduction would help slow down price advance. "Lowering VAT cannot really contain inflation if production costs remain unchecked."

Potisepp said that the Estonian meat sector has been making a loss for some time, with bakeries in the same boat and fisheries about to climb in too.

"The dairy sector is the best off, while dairy prices have also grown in shops."

The entire food sector turned a combined profit of €22 million in the first six months of 2022 of which €18 million came from beverage producers. The combined turnover of the Estonian food sector is €1.8-2 billion.

"Producers are not in control of final prices. Analysts have pointed out that retailers' markup contributes to a considerable degree. Perhaps markup could be made more transparent as it is a vital component," she suggested. "My information suggests supermarket margins are well over 40 percent today. Even though we understand that the price of energy has gone up for everyone and is affecting the entire chain."


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Editor: Mait Ots, Marcus Turovski

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