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High prices in groceries. Here’s what awaits us in 2023

High prices in groceries.  Here's what awaits us in 2023

We introduced price increases in March and another in June, but the end of this year will require another price correction. I think it will increase by a few percent. I’d like to close the topic of increases for a longer period of time, Maspex President Krzysztof Pawiński told PAP Biznes, but there are a lot of unknowns, so I’m not sure.

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High prices in groceries

Among the main reasons for the need to raise product prices again, Krzysztof Pawiński lists the massive increases in prices for electricity and gas, as well as for agricultural products. Indicates that not all costs are actually included in the prices.

– The issue of electricity and gas – I think everyone is afraid of what will happen at the end of the year and the next, I think. Most large companies buy a significant portion of their energy in futures contracts one year in advance. High Energy contracts are not currently included in our product pricing today. This will be another inflationary driver – He said.

– The same goes for the prices of raw materials. Compared to last year’s purchases, for example, sugar is more than 100 percent higher. More expensive. We’re in buying season – there isn’t a single agricultural fruit that could be cheaper. It’s often a jump up by more than 100 percent and tens of percent. It’s a low penalty. Wheat is slightly below the last peak – last year we had less than 800 PLN per ton, now it is 1500-1600 PLN per ton, and up to 1800 PLN per ton – he added.

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Prices on store shelves. What awaits us in 2023?

The CEO predicts that next year will be a period of further price increases for agricultural products, as farmers are currently experiencing increases in the two main costs, namely fertilizers and plant protection products. Fertilizers increased by more than 300 percent, and plant protection chemicals were released several tens of percent per year. It is unrealistic to expect farmers to bear this burden, which will translate into lower purchase prices within a year.. We must take into account further huge increases in the prices of fruits, vegetables and grains – said the head of Maspex.

– There is also the issue of the exchange rate. This translates, for example, into investments in, say, product lines, because almost every item is purchased in US dollars or euros. He added that this also affects the purchase of imported raw materials – we also pay for oranges or bananas in foreign currency and this will not change.

Krzysztof Pawiński does not hide that the environment has been favorable for food companies over the past few years. As he points out, Prices were low, and agreeing with retail chains that prices would not change for the next six months was not a difficult task. – Now that’s impossible. Sales revenue on the entire Polish food market is PLN 290 billion. He said that Maspex, with its 13 billion PLN, is not a strength at all, and retail chains have shown us where we are many times over.

Definition of an energy-intensive company

Retail chains accept information from their suppliers about the need to introduce a price increase, on the one hand they understand, but on the other – their first reaction is always this. – The results of companies with these costs are in red, so for them price increases are or are not – he added. The President notes that Prime Minister Mateusz Morawiecki has announced measures to counter rising energy prices for energy-intensive companies. But the definition of such companies has not yet been provided.

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– I used to think that our company was not very energy-intensive – our energy level in the cost of production was 3%, but now it is 7%. And it grows. In addition, other components of production costs are also rising. We run efficiency programs, each year using a little less energy per unit of product produced – he said.

It is worth considering the solutions of other countries. In Romania, where we work, the government has set a cap on the price of electricity and gas, Germany has announced a huge subsidy program. I don’t know in which direction Poland will go – Krzysztof Bawinski added.

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