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VAT hike reflecting differently in Estonian supermarket chains

Estonia's VAT rate, which grew to 22 percent from January, did not result in an even price hike in all shops and some chains have opted not to hike the price of popular goods in order to stay competitive.

ERR compared prices in December and January and found out that hikes have been selective, with more popular food items the least affected.

A liter of milk in a plastic bag went for 57 cents at most retailers both in mid-December and early January.

Martin Miido, head of communication for Coop Eesti, told ERR that the new VAT rate will reflect in prices gradually, starting with less popular products, while the prices of some staples will be retained at the current level.

Miido suggested that supermarkets have been selling the cheapest milk for less than the buying-in price since this summer.

Leaving aside the cheapest milk on the market, price advance has hit other products in the category.

Potatoes have only become more expensive in Selver supermarkets at 49 cents per kilo, costing 38 cents in other chains both in December and January.

Kristjan Anderson, head of business accounting for Selver, said that the company is selective about the prices to which the new VAT rate will be applied.

"We carry over 60,000 products in our shops and will not be changing all prices. We will try to adjust the prices of a few thousand products. The end price hike would come to 1.7 percent, which is what we'll do with some items, while we will not alter the price of others," he said.

But the price of some products will also grow by more than 1.7 percent as Anderson said that Selver cannot shoulder the total effect of the tax hike, which the retailer estimates at €12 million annually.

The Selver representative also said that January will be a transitionary month, and that major price changes should be done by February. New alcohol excise duty rates will also take time to manifest in the prices of products on shelves.

All supermarkets, with the exception of Selver, have hiked the price of eggs by a few cents, with the price of bananas largely unchanged. The prices of meat products have remained the same in some and grown in other shops. The same goes for cheese and sweets.

Autor/allikas: Priit Mürk/ERR

Holidays at the shops

Talking about the recent holiday season, Martin Miido said that Coop's results matched last year's, while people clearly preferred cheaper alternatives.

"A typical example is customers buying sausage instead of ham," he remarked.

The trend where people prefer cheaper goods has been deepening for the past year. Christmas staples, like blood sausage, gingerbread and tangerines were still popular in December.

Selver also largely matched its 2022 result, selling fewer products but generating the same result financially.

"One thing we can see is that people cooked more this year – milk, flour, fresh meat. Sales of fresh meat and fish grew by almost 15 percent, while the sale of pre-seasoned meat products was down by nearly as much," Kristjan Anderson said.

Turnover of hair and body products grew by 5 percent at Selver, moving into Christmas, while discounted products made up 55 percent of the average shopping cart, which Anderson said was an unforeseen development.

He added that January and February are the slowest months in retail usually and that people are postponing decisions to buy.

Anderson said that retailers should be glad to see sales revenue grow if only by a few points in 2024. "We are heading into 2024 with very conservative expectations," he admitted.

Estonia's VAT rate grew from 20 percent to 22 percent from January 1.

Prices in a supermarket. Source: Priit Mürk/ERR

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Editor: Marcus Turovski

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