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Retail food prices decreased by 7.6% m/m (compared to the last week of May) and 10.1% y/y (compared to June 2015). The biggest drops were observed for tomatoes (-65.5%), cucumbers (-63.3%) and eggplant (-33.7%). Only a few products gained in value. The highest increases were recorded for cabbage (12.8%), tea (7.3%) and rice (7.2%).
TBILISI FOOD PRICES REACH MINIMUM
Retail FPI reached its lowest mark at the end of June with the main drivers being fresh fruits and vegetables. On the one hand, price declines in the fresh produce category are always expected at this time of the year, however, the 10.1% y/y decline in prices comes as a nice surprise for those poor consumers who could not escape 30+ temperatures and stayed in Tbilisi. Such a sharp annual change in prices requires an explanation other than seasonality.
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Seasons change, and so do Georgian food prices. In the second week of June, Georgia’s major food retail networks (Carrefour, Goodwill, Fresco and SPAR) lowered their prices by an average of 3.9% y/y and 1.8% m/m. Compared to the end of May, prices moved the most for the following food items: eggplant (-21%), pasta (-10.3%) and coffee (-5.7%); wheat flour (+11%), buckwheat (+10.5%) and garlic (+6.8%).
THE LAW OF ONE PRICE … WHAT LAW?
Why should exactly the same product sell at dramatically different prices in different shops? It shouldn’t. At least that’s what the economics “law of one price” says. The reality – in Georgia and elsewhere – is, of course, different. Very different. Let’s take a quick look at some of the most common grocery items sold in major Tbilisi supermarkets:
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Georgian retail food prices are up 1.1% y-o-y (May 2016 vs. May 2015) and 1.0% down m-o-m (compared to last month). Compared to mid-May, cheese, apple and carrot experienced the biggest price declines of 8.5%, 8.4 % and 7.1%, respectively. The prices of cabbage, buckwheat and peach are up by 8.3%, 8.3% and 7.1%, respectively.
WHY DOES “THE LAW OF ONE PRICE” NOT HOLD IN THE GEORGIAN FOOD RETAIL SECTOR?
Looking at how different are the price tags for the same exactly goods offered by Tbilisi supermarkets, one may wonder what’s going on. Why is one supermarket chain able to get away with pricing imported rice or buckwheat more than twice more expensively than its competitors? By the same token, why aren’t Georgian consumers able to punish the pricy sellers by switching to alternative outlets?
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Driven by fruits and vegetables, Georgian retail food prices are going down. In the first half of May, ISET’s Retail Food Price Index lost 2.9% y/y (compared to May 2015) and 1.8% m/m (compared to April 2016). The leaders in prices declines were cheese, greens and coffee: down by 10.2%, 5.1% and 2.7%, respectively. Not all food items lost in value. Banana, garlic and frozen chicken are actually up by 12.5%, 9.9% and 6.0% respectively.
WHAT’S WRONG WITH CUCUMBERS?
While most fresh products are currently trading below their last year’s prices, an 80.5% y/y increase in the price of cucumbers seems really odd. What could possibly go wrong?
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