In Latvia, food producers and traders do not have equal market power

She noted that food producers in Latvia are in an unequal situation when dealing with traders, and this is a problem not only in Latvia.

“The manufacturer is always not an equal in negotiations with the merchant, because there are many manufacturers and if the merchant does not like someone or can find better delivery conditions, the goods are not taken or he has to agree to the conditions. At the same time, there are not so many traders, and in Latvia this situation is still more pronounced than in other countries – we practically only have two very serious networks,” Gulbe said.

She expressed the opinion that in this case, the participation of the state is necessary, creating favorable conditions for the business environment throughout the country, and it will also be necessary to support local producers, but the Ministry of Agriculture cannot do this alone.

“Our business environment is not conducive to entrepreneurs, so the government’s joint task might be to promote the business environment so that even large retail chains would be willing and interested in entering the Latvian market,” Gulbe said, adding that the state might also provide more support local producers so that they can compete with producers from foreign countries.

It has already been reported that in the final section of the study by the Competition Council for the market of egg, fish, dairy, meat, grain and bread products, it turned out that retail chains apply on average a higher markup for products produced in Latvia than for products produced outside the country , and also identified inaccuracies in retailers’ cooperation agreements with suppliers.

The Council urged buyers, including retailers, not to abuse their purchasing power, to be vigilant and not to violate fair trade practices with their suppliers, as provided for in the Unfair Trade Practices Act.

During market monitoring, the Council found that doctor’s sausage, fresh chicken and fresh fish produced in Latvia have on average a higher markup at the retail stage than similar products produced outside Latvia. For example, doctor’s sausage produced in Latvia was on average 16% more expensive than doctor’s sausage produced outside Latvia. At the same time, the markup for local fresh chicken at the retail supply chain stage is on average 2.9 times higher than for imported chicken.

In addition, the Council concluded that retailers price some local meat, egg and fish products on average cheaper than products produced outside Latvia. In particular, during the period under review, fresh pork produced in Latvia was on average 1.6% cheaper than that produced outside Latvia, while in the period from January to April 2022 and from April to May 2023, fresh pork produced in Latvia, cost 2.4 times more than those produced outside Latvia.

The Council also notes that often the supplier produces both goods under its own brand and goods of independent brands of the manufacturer, identical in composition. The production costs of such goods are equivalent, but their purchase prices differ significantly.

It is at the production stage that the product generates all production, packaging and other costs, while at the retail stage sales are ensured, where the costs associated with it are formed. However, the Council found that an increasingly large share of the markup is formed precisely at the retail stage.