Retail chains lower prices: Dundulis and Drulienė explained the reasons for this

At the Monetary Affairs fair, we spoke with Vilma Druliene, Maxima Commercial Manager, Dainius Dundulis, the main shareholder of the Norfa Group, and Egidijus Mackevičius, Director of the Lithuanian Association of Meat Processors.

Buyers start saving, but alarms are not yet visible.

Vilma Drulienė, Commercial Manager at Maxima LT, told the program about shoppers’ changed habits: fewer and fewer non-essential goods are being purchased. According to her, it similarly started during the 2008-2009 crisis.

“Analyzing the data, we note that those fears about the future with our clients really exist, as sales in those categories that are not the first necessity have decreased. We found that buying clothes and even candy is much less than before this quarantine. We think that uncertainty about the future probably makes you think of coming to the store and choosing items in your cart.

We are still seeing a change in consumer behavior that has encouraged us to go to stores less frequently from the start and now maybe this and a long term habit have emerged, visiting on average less per week at a time. Less frequent going to the store reduces sales of short-lived goods and in a category such as fresh buns, the change in sales is negative.

When it comes to fresh produce, it’s actually sales that have grown, but again, we’re seeing much more food being produced in the home and less frequent visits to restaurants and coffee shops. (…) We still do not see other significant changes, but we have also analyzed them in 2008-2009. crisis and the behavior of our consumers, then, I have no doubt that in times of crisis, uncertainty about income, about work, about the future, people will definitely look around and look for good prices, stocks. (…) Then it all started with the fact that it started to reduce the purchase of unnecessary products, “said V. Drulienė.

Dainius Dundulis, the main shareholder of the Norfa group of companies, stated that no significant changes in customer behavior have been observed so far, the situation is equivalent to the same period last year. It is only noted that sales of more expensive products decrease slightly.

“I remember 2008. The end of 2009. Of course, I really wouldn’t want to wait for the same moment, because it won’t go away when the rotation starts to drop, but in any case, we are starting to compete even more with the competitors because we are all trying of taking that shot at our side. Of course, in such cases, margins decrease, but in any case we are looking and where we can buy better and cheaper. We are forced to reconsider costs so as not to work at a loss or at least end up falling when surcharges fall. That was the case in 2009, and what it will be like now, I don’t know.

From the point of view of our business, I really don’t see those signs yet, because in fact those losses have not decreased. During quarantine, the average check had increased almost 2 times the average, so we had the same turnover and fewer people were shopping, they just walked to the store less often.

2009 our turnover fell somewhere around 10 percent AND the surcharges if we were to work there somewhere with 18 percent. by a margin, it fell to 15 percent. (…) So far, it is stable, the margins are not falling, “said D. Dundulis, mentioning that in May it will be possible to pay additional bonuses to employees for work during quarantine.

By lowering prices, manufacturers expect more to be sold

Last week, some retail chains announced that they would pay more attention to Lithuanian products and try to lower prices.

Maxima announced that 15 percent. will reduce the prices of 500 Lithuanian products.

“We estimate that our clients will save approximately 1.5 million per month. Of which 1 million euros is the contribution of our main Lithuanian producers, and 0.5 million, a third of the amount is contributed by Maxima. (…) We have reduced the regular selling prices and discounts will be applied to the same products during promotions. We are not talking about a short term solution or a short term price reduction factor. We are talking about the fact that Lithuanian companies are taking the shoulder and we say that as long as Lithuanian companies take over, that campaign will continue to live, ”said V. Drulienė.

Egidijus Mackevičius, director of the Lithuanian Association of Meat Processors, said the producers agree to cut prices in the hope that they will sell more products.

Meanwhile, D. Dundulis said that due to the actions of competitors, they themselves are lowering prices, and currently cheap prices for raw meat and milk also provide opportunities for this.

“In any case, any buyer wants to buy cheaper products. This is always the case. As for the price reductions themselves, the fact that Norfa also reduces those prices, because we have a rule, if the competitors have reduced the prices, Norfa first reduces, then only analyzes the reasons for that. Because if we do not reduce prices we will lose the buyer. I can confidently say that all the prices that our competitors have made are decreasing. Almost the reasons: today, during the period quarantine, the price of raw meat has fallen, the price of raw milk has fallen. There is an opportunity to reduce prices in those areas. Sooner or later that would have happened or had already happened in any case. (… ) The price of raw material for milk and meat has been kept in one place for a week, so it will not fall any more.

“The price level that is now complicated enough for companies. Although raw material prices have fallen, companies may lower the prices of some products, but in this case, we are more concerned that companies agree to have lower incomes to sell, but expect higher quantities to be sold. (…) The revision of the import range should be considered so that the same Polish sausage does not compete for a penny with a Lithuanian sausage. Reducing the range of imports would be of great help to the producer when he reduces the price, ”said E. Mackevičius.

The representatives of the retail chains stressed that everything depends on the buyers. If they buy more Lithuanian products, there will be less of the same products on the shelves in other countries.

“We are around 80 percent at the height of the campaign. We had this range of food in Lithuanian and we always try to make sure that products from local producers could be on our shelves and at least be tested by our customers. When it comes to of imports I think naturally certain things happen. If we start selling more Lithuanian products then they need more space on our shelves and as the remaining space decreases the range also decreases, “said V. Drulienė.

D. Dundulis also said that there are currently more expensive grain products: grains. And fresh meat sales have increased as residents no longer shop in Poland.

“Especially buyers in southern Lithuania cannot go to Poland. We are aware that fresh meat is sold there at a reduced rate of VAT, and we have 21%. In any case, that price still affects buyers and you can drive a certain number of kilometers because of a cheaper price, ”said D. Dundulis.

“The price of pork has fallen on the German stock exchange. Lithuania depends heavily on imports, because we have to import more than half of pork to supply the population. The price of meat It has fallen because all exports are practically closed: nobody needs a loin or a cut, we have to think a lot about buying cattle, where we will sell it, that pressure is due to falling prices and companies can apply certain promotions, prices lower and adapt to networks offered stocks

Exchange (pig – Delphi), the price has dropped to around 20%. The price of meat varies widely, with at least a 25-25 percent drop in purchases. This is a significant drop. Last year, we had 40 percent. pork price growth, no product has increased its price by 40 percent. The companies suffered heavy losses at the time and now there was a pullback from that problem, but coronavir did its job again. We can live without being covered in fat, we will try to fulfill our obligations, ”said E. Mackevičius about the situation of Lithuanian meat producers.

At the end of the conversation, the representatives of the retail chains mentioned that the biggest challenge at the moment is to guarantee the protection and health of the workers.