July 1 – July 7, 2013

Officials learned to use peoples fear of rising prices to unload warehouses

The situation has not changed
Officials learned to use peoples fear of rising prices to unload warehouses

In July, vodka price will go up by one fourth.

Some food industry sectors experience problems due to increasing warehouse stocks. Along with the traditional sales, authorities used a new tactics, exploiting the consumer’s desire to save money on a product that will soon become more expensive. This tactics allows addressing the issue of enterprises’ working capital and increases sales volumes. Moreover, the population is satisfied due to imaginary benefits they get, even though in reality benefits are very minor.

In 2013, the food industry is the leading industry in Belarus. Its industrial production in January – May was BYR 55 344.2 billion (USD 6. 4 billion) and compared with 2012 grew by 5.3%. Within the industry the dynamics is as follows: dairy producers do not have problems with sales, whereas a significant increase in excise duties on alcohol has resulted in greater stocks of vodka – by 5.6 times (419 thousand dal on January 1st, 2013 and 2328 thousand dal on June 1st, 2013) equaling 195.6% of the average monthly production volume.

Confectionery industry in order to reduce stocks lowered prices. Aggressive advertising, lower prices for certain products and certain restrictions on imports helped to effectively reduce inventories.

Excise duty’s share in alcohol price is quite high, which limits the sales’ opportunities. Therefore it was announced that vodka minimal sales prices will go up by 25 % as of July 1st. However de facto, vodka price will not increase, since its price is already higher than the new minimum selling price to retailers (BYR 27,000 per 0.5 liters). The announcement was made in order to improve the distilleries’ economy by limiting the pressure on them by the retailers. However, consumers do not understand the implications and start stocking up on vodka, thereby helping to unload the warehouses.

Citizens might be somewhat disappointed and frustrated when vodka prices do not go up as they anticipated, but at the same time, officials would have managed to fulfill their task to unload the enterprises’ warehouses.

Consumers should stop stocking up on goods in the view of the announced price increases, and rather consider opportunities to invest money in more important goods or services. As is, they are not saving money and simultaneously cannot afford needed goods and services, because their funds are frozen in less important goods.

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