“For fruits and vegetables, the margin can even reach zero,” said Nikolay Valkanov, Executive Director of the Modern Trade Association.
The Ministry of Agriculture believes that the new law will improve the situation both for prices and for producers, who have been complaining that their products are bought at low prices, while retail chains later make large profits from them.
“Retailers always have the lowest profit margins. This is the case worldwide, and Bulgaria is no exception,” said Nikolay Valkanov, Executive Director of the Modern Trade Association, in an interview for Hello, Bulgaria.
“In retail, profits range between 2 and 5%, in processing – 6 to 10%, while in agriculture – 25 to 30%,” Valkanov explained.
“The draft law aims to secure even higher profits for primary agricultural producers. But if profits or expenses are regulated by law, that cannot be good for anyone. Farmers will become even less competitive. And at the moment, unfortunately, a large share of Bulgarian producers are not very competitive. The reasons are many – productivity, investments, and long-standing structural issues. If you compare the gross added value per unit of land in Bulgaria with other European countries we compete with, you’ll see that here it is the lowest,” said Valkanov.
According to him, in the case of fruits and vegetables, margins can even reach zero – meaning they are sold at a loss.
“In a given product category, even if the markup reaches 80%, as some claim, this only means that such are the costs of selling the product – depending on turnover, transport expenses, or the need for refrigeration. There are countless factors,” Valkanov said. “Competition in retail is quite strong. We’re not talking only about the large chains, whose market share does not exceed 50%. Even if you want to sell something at a higher price, the market pushes you down,” he added.
Regarding the planned ‘Shops for the People’, Valkanov commented: “Let’s first see them open, let someone stock them, form prices, and see how quickly the goods sell out… Will such a shop even exist? We’re all waiting. Let them do it. Let’s see how it works with a 10% gap between purchase and sale price. Every product carries different costs in getting to the shelf.”
“As for wholesale, counting on 10–20% margins is not serious. This can only lead to higher prices being transferred onto goods that are not subject to controlled markups. This is exactly what happened in Hungary. There was also a shortage of goods. If businesses cannot sustain themselves, they will have to compensate their costs and will stop selling products under price controls,” Valkanov explained.
Can the requirement that 80% of milk and dairy products come from Bulgarian producers be met?
“If we include cheese and butter in the calculation, Bulgarian raw material accounts for about 60% of what is sold in the retail network. Let’s not forget that dairy products are also traded in the HoReCa sector – hotels, restaurants, catering – and in significant volumes. If, in the end, we try to force everything into the retail chains, regardless of whether it’s possible or not, then what stock will other distribution channels work with?” Valkanov asked.
When asked about why prices in the same retail chains in Bulgaria can be higher than in Spain, Valkanov said: “Every market is different, every company’s commercial policy is different. Some producers and retailers have a policy of maintaining the same price across all European countries. But this is not necessarily true for every merchant. In the end, everyone has the right to set their own prices in the retail network.”
“The Bulgarian market is smaller. This always has an impact because a shipment, to reach here, always costs more. Turnover is different. Transport logistics, depending on where production is located, may also vary,” he said.
“We explained a thousand times, with the absurd example of some butter – it’s not even produced in Bulgaria, it comes from France, it must be transported here, and its sales volume in Bulgaria is extremely low, which is why every retailer may add a slightly higher markup,” Valkanov noted.
“In a report by the Commission for Protection of Competition (CPC), it is stated that between 2022 and 2023, wholesale prices of dairy products rose by 20–70%, and pork – by 20–120%. Let’s not talk about markups – suppliers already took full advantage of the situation back then. This can be seen in the CPC analysis published earlier this year,” Valkanov added.
