How do supermarkets sell products that they buy so cheaply so dearly? “It’s diffuse,” ASAE assumes

 How do supermarkets sell products that they buy so cheaply so dearly?

Suppliers complain that they are selling their product at a price significantly lower than the price that hypermarket customers are asking. Does inflation explain everything? “Drafts of illegitimate profit may have been incorporated into some of these products,” explains the ASAE Inspector General

The foods are different, but the complaints of those responsible for putting them in the supermarket are based on an identical trend. “The difference is not 25%. They buy a kilo for one euro and then I see it in the shop for 5 or 6 euros,” admits a fisherman from Sesimbra. “I sell a product for 0.30 cents and they sell it for 2.5 euros,” says a tomato grower from Benavente. None of them can justify why, from their hands to the customer’s, the price is reaching such exponential margins.

The Food and Economic Security Authority (ASAE) believes this process is “relatively diffuse” and should be analyzed beyond inflationary issues. “There may be concepts of illegitimate profit in some of these products, that’s what you have to dissect and see,” Pedro Portugal Gaspar, inspector general of ASAE, told CNN Portugal.

For this analysis, it is important to verify that there is “more or less a certain practice that profit margins are between 10 and 20% throughout the chain,” adds Pedro Portugal Gaspar, emphasizing that, if in “some stages shoot up to 30 or 35%” is “doubtful that this is allowed” or that there is no “the problem of illegitimate profit.” It is an effort that ASAE will have to identify and communicate to the prosecution if these assumptions are met “.

On the other hand, Portugal, being an open and free economy, has no rules regarding profit margins, unless the country is going through exceptional times, such as during the pandemic, when restrictions were imposed on prescriptions such as masks and alcohol gel. . . This, says the head of ASAE, allows “the law of supply and demand to function in an open field.”

Deep down, he adds, the question stems from an “older and cross-cutting” problem related to the formulation of prices. “We can have producers supplying six or seven different types of products to a large-area final seller” and this can lead to “some price compensation”.

Fishermen sell cheaper in the harbor, but fish is more expensive

Simão has been a fisherman in Sesimbra since 2009 and almost daily sees his fish being sold on the fish market at a price significantly lower than the price that reaches the end consumer. “I get paid 74 cents for a kilo of horse mackerel and more than 80% of the time it is sold for 5 euros,” he says, guaranteeing that his “best customers” are the representatives of the commercial surfaces, who are the ones with the most power to dispose of the product”.

“At the end of the day I didn’t sleep with my wife, I worked 15 hours and I didn’t get any of this,” he sighs.

All this comes at a time when fuel prices are putting a lot more pressure on fishermen. Since the beginning of the war, Simão had to deal with wage increases of 300 euros and 400 euros. “We are isolated,” he notes.

The rise in fuel prices has also prompted many fishermen to look for other types of solutions, such as doubling the amount of fish caught. But even then the situation did not improve. “We’re not sure what’s going on, but we sell fish on average 40 to 50% cheaper than in February,” says fisherman Manuel Marques.

Marques, speaking to CNN Portugal in October, says his strategy and that of several fishermen in Matosinhos was to effectively increase the volume of fishing to offset the increase in fuel prices. “In February, a kilo of mackerel was sold at the quay for an average price of 3.24 euros. With the increase in the price of petrol in August, we doubled our catches and sold 3,000 kilos of hake. Except that we sell the fish for an average price of 1.70 euros,” he says, emphasizing that “the fish loses commercial value on the first sale, but gains on the last one”.

For Simão, the only way to “do justice to what he receives” is to liberalize the auction in which the fish is bought from the fisherman. That’s because, according to Docapesca, the state-owned company that manages the operation of the auctions, only fishmongers or restaurateurs can buy there. “The market must stop being a niche for these people, only if everything is liberalized for the common citizen can this situation change”.

But the phenomenon is not exclusive to fishing activities. João, a farmer from Benavente, cites as an example the sale of tomatoes, one of the agricultural products that increased the most with inflation. “We sell at a price and then it reaches the consumer for a much higher amount,” he says, pointing out that, with inflation, “there’s some benefit, we can’t hide it.”

Excess profits targeted by the government

These complaints from producers come at the same time that the Council of Ministers approved the bill that regulates the new taxes that will tax the excessive profits of food distribution companies. This year alone, Jerónimo Martins, owner of the Pingo Doce stores, closed the first nine months of the year with a profit of 419 million euros, an increase of 29.3% compared to the same period last year. Sonae MC, which controls Continente’s hypermarkets, also posted sales of EUR 1.6 billion in the third quarter of this year, a year-on-year increase of 16%.

ASAE’s Inspector General states that while achievements are being made in vastly different areas, there is a common denominator in the passed bill and in ASAE’s action over the past few months, namely “a realization that there is more to be gained from these major operators ”.

In contrast, both Sonae and Jerónimo Martins reject the concept of abnormal or excessive profits. “We don’t see extraordinary earnings in any of our businesses as a possible consequence of us benefiting from the inflationary environment. On the contrary,” João Dolores, Sonae’s chief financial officer, said at a conference after the results were announced in November, adding that the owner of the Continente hypermarkets “is feeling tremendous pressure on our cost base and a deterioration in margins.”

Jerónimo Martins CFO Ana Luísa Virgínia also assured, quoted by Bloomberg, that the group that owns the Pingo Doce stores rejected the same idea, stressing that Portugal “has the highest corporate tax rate in Europe” and “we don’t know how the law will come in terms of calculating so-called windfalls”.

At the same time, the Competition Authority has imposed several fines of many millions of euros on large hypermarket chains such as Auchan, Continente and Pingo Doce for participating in alleged price agreements. The last, in September, amounted to 5.6 million euros. Is it a sign that the industry has been without regulation for a long time?

Pedro Portugal Gaspar guarantees that he does not know if this is the case, but agrees that “sometimes situations have an environment that warrants different attention and relevance”. Now, he insists, it is “time to deepen the inspection”.