Food prices stabilize in Estonia, rise in VAT will bring further increase

Bread in a supermarket in Estonia. Photo is illustrative.
Bread in a supermarket in Estonia. Photo is illustrative. Source: Siim Lõvi/ERR

In recent weeks, many chain stores in Estonia have cut prices on food and consumer goods, following a lengthy period of inflation. Retailers say that, in general, food prices are nearing stability, and the chains do not expect any further price rally ahead of the VAT hike to come into effect in the New Year.

When comparing current food prices with those of last year, they are clearly in decline, selection and procurement director at supermarket Prisma, Kaimo Niitra, told ERR: "If we are talking about the whole food trade in summary, then yes, an increase of this kind of increment is no longer expected. A certain stability has been achieved, while price competition in the market is tough, and we are monitoring things and reacting accordingly," said Niitra. "However, we still have to bear in mind the smaller, narrower categories as well, where there is inevitably still great price pressure, so a price drop here is not expected anytime soon."

There is still great price pressure being exerted on, for example, pork, whose prices have been impacted on both by the African swine fever (ASF) and that demand is outstripping the supply from domestic suppliers in Estonia.

Communications manager at Lidl, Katrin Seppel, told ERR that if taking into account what is happening on the world market, food prices in Estonia have not yet achieved 100 percent stability.

Seppel said: "We still see some fluctuations here, but recent observations have demonstrated that the price of dairy products has certainly fallen, while we have also observed that the price of grain has dropped, though the effect of all these price decreases will reach the consumer in the longer term."

Compared with the situation a year ago, edible oil, flour products and coffee have all become more affordable.

Matthias Jaaksoo, head of purchasing at Maxima, says the fall and stabilization of prices on the Estonian market is also related to intense competition between retail chains.

"With regard to a price fall, the pressure being exerted at present is likely still related to the retail chains. Other retail chains have also taken a clear position that these prices should be stabilized, and reduced in certain product categories. Manufacturers then support this process to the best of their abilities, but it is clear that the situation on our markets is so competitive that we will certainly lower many of these prices, at the expense of our margins," Jaaksoo said.

However, the consumer is still price sensitive, according to Niitra, and while customer numbers have risen fractionally since last year, they have not been restored to the levels before the most serious inflation hit.

Oliver Rist, director at Coop Eesti Keskühistu, told ERR that turnover of products on offer is growing faster than that of products being sold at regular sales prices. "This trend Continues, and the consumer is being somewhat more cautious," he said.

Further evidence for a subsiding in the rate of inflation over the past three months can be seen in data from Statistics Estonia.

Spokespeople for the various retail chains take the view that there will be no further major price rallies this year. In the new year, however, the planned 2 percentage-point hike in VAT will exert an impact on food prices.

Rist said: "The sale of food products is so competitive that retail chains certainly do not have the ability to cover this two percentage-point VAT rise, so to speak, alone. This is probably coming in the new year."

From January 1, 2024, VAT, properly speaking a sales tax, is set to rise from 20 percent, a level where it had remained since 2008, to 22 percent. 

Furthermore, there are no VAT exemptions on food or consumer goods in Estonia.


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Editor: Andrew Whyte

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