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:
| Category |
Product |
Brand Name |
Minimum
Price |
Maximum
Price |
% difference
between MIN and
MAX prices |
| Grocery items |
Buckwheat |
Supremo, 0.8 kg |
2.65 |
2.9 |
9.40% |
| Rice |
Supremo, 0.8 kg |
1.95 |
2.5 |
28.20% |
| Wheat flour |
Mziuri Veli, 1 kg |
1.65 |
1.81 |
9.70% |
| Wheat flour |
Makfa, 1 kg |
1.55 |
2.05 |
32.30% |
| Bread |
White Batoni |
0.71 |
0.8 |
12.70% |
| Sugar |
Chveni Sufra, 0.9 kg |
1.75 |
1.95 |
11.40% |
| Sugar |
Supremo, 0.9 kg |
1.65 |
1.75 |
6.10% |
| Pasta |
Supremo, 1 kg |
1.4 |
1.8 |
28.60% |
| Vegetable Oil |
Zlato, 1 liter |
3.5 |
3.99 |
14.00% |
| Vegetable Oil |
Oleina, 1 liter |
3.45 |
3.95 |
14.50% |
| Eggs |
Koda M |
0.3 |
0.32 |
7.00% |
| Eggs |
Dila M |
0.3 |
0.32 |
7.00% |
As is easy to see, there is very little difference in prices of some items, say, Koda and Dila eggs, which sell at 30-32 tetri. Yet, how come one supermarket is offering exactly the same 1kg package of Makfa flour for 1.55 GEL while another is pricing it at 2.05GEL (a difference of more than 32%)? Makfa flour may be an extreme case, but there are significant differences, well above 10%, in the prices of most grocery items.
One possible explanation is that supermarket managers don’t know what they are doing and base their pricing decisions on greed rather than calculation. Greed, however, may be a poor guide for profit-making. Once bitten, consumers may get twice shy about shopping at greedy outlets. With competition among Georgian supermarket chains increasing over time, greed and stupidity will be quickly punished.
Another possibility is that some supermarket chains are better than others in securing low prices from their local and international suppliers. For instance, this is the reputation of the largest US retailer, Wal-Mart. If this is the case in Georgia, we should observe some supermarkets being consistently cheaper than others in most food categories.
Finally, supermarket managers may be very smart guys who know how to lure consumers into their establishments. One common trick is to use so-called “loss leaders” – the term for goods advertised or sold at or below cost price. As explained on thekrazycouponlady.com, “the objective behind having a few of these for a sale period is to “lead” customers into the store with the premise that, once inside the store, the customers will also purchase full-priced items, making up for the profit loss.”
It is indeed quite common for shoppers to succumb to the impulse and fill up their shopping carts once they get into a store. But smart shoppers – hopefully, there are some of them in Georgia – can do much better!!! Why not hunt for “loss leaders” and stockpile items that are sold at rock bottom sale prices? Outsmart supermarket managers, buy cheap and avoid paying the full price every time you run out of a product!
Food Price Index Recent Publications
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On 15 June 2021, the National Statistics Office of Georgia published its annual publication for the agricultural sector - Agriculture of Georgia 2020. According to the publication, agriculture, forestry, and fishing comprised 8.4% of GDP in 2020, higher than the 7.2% share in 2019, but in line with the general trend over the last five years (agricultural GDP comprising on average 7-8% of GDP). Agricultural GDP in nominal terms increased by 13% on an annual basis.… Read More
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On 29 December 2020, the parliament of Georgia approved the state budget for 2021, which includes allocations of around 18.3 billion GEL. From which the Ministry of Environmental Protection and Agriculture (MEPA) will receive 451.6 million (2.5% of the total budget allocation). MEPA will direct 10 mln. GEL towards the Environmental Protection and Agriculture Development Program (2.2% of MEPA’s total budget), with around 389.6 mln. (86.3% of MEPA’s total budget) to be allocated to agricultural… Read More
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The COVID-19 pandemic raised concerns about the food security of many countries, in particular import-dependent developing countries like Georgia. Trade restrictions imposed by Georgia’s trade partners tightened the supply of some cereals and vegetables, signalling the risk of an increase in food prices. While there is no formal evidence of food insecurity due to the pandemic, given that Georgia is a net importer of wheat the state subsidized wheat imports, and, according to Georgia’s Wheat… Read More
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The National Statistics Office of Georgia (GeoStat) recently published its economic review for Quarter II 2020. The publication highlights that agricultural production increased by 4.7% in the second quarter of the year compared to the same period in 2019. Furthermore, agriculture contributed to 10.2% of the country’s total GDP during the same period. In the second quarter of 2020, Foreign Direct Investments (FDI) in agriculture also increased and were almost six times higher than the… Read More
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On 15 June 2020, the National Statistics Office of Georgia published its annual publication for the agricultural sector - Agriculture of Georgia 2019. The publication shows that agriculture, forestry, and fishing comprised 7.2% of the nominal GDP in 2019, slightly lower than the 7.8% share in 2018, but in line with the general trend over the last five years (on average 7-8% of GDP). In nominal terms, the output of agriculture increased by 4% in 2019… Read More
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On December 10, the parliament of Georgia approved the state budget for 2020. The budget includes allocations of around 14.4 billion GEL. Out of which, the Ministry of Environmental Protection and Agriculture (MEPA) will receive 353 mln. GEL (2.4% of the total budget allocation). MEPA will direct approximately 293 mln. GEL (2.0% of the total budget allocation) towards agricultural development and 60 mln. GEL (0.4%) will be spent on environmental protection. Compared to 2019, the… Read More
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On 30 August 2019, a public hearing to discuss Georgia’s Rural and Agricultural Development Strategy for 2021-2027 was conducted at the Ministry of Environmental Protection and Agriculture (MEPA). The new strategy document represents a roadmap for Georgia’s rural and agricultural development for the next decade. The strategy outlines three major goals to be achieved by 2027: 1. Increasing the competitiveness of agricultural and non-agricultural sectors; 2. Sustainable management of natural resources, preservation of ecosystems, and… Read More
