SPAR Hungary has announced substantial changes in response to a government-imposed price margin freeze affecting approximately 30 food items.

The regulation is estimated to generate monthly losses of 1.5 billion forints for the company.

In a letter sent to employees, the management indicated plans to alter their retail practices, cautioning that if adjustments are insufficient, further actions may be necessary.

Heiszler Gabriella, CEO, and Vonier Eduard, managing director, highlighted that this is not the first governmental measure that has complicated their operations, stating that 2024 marks the third consecutive year in which SPAR Hungary has operated at a loss.

Management reassured employees of their commitment to providing reliable services to customers while ensuring stable employment.

They clarified misconceptions surrounding price margins, explaining that a maximum 10% margin, after accounting for special retail taxes, yields just over 5%, leaving little to cover operational costs, salaries, utilities, taxes, or rental fees.

In their communication, the executives encouraged staff to embrace forthcoming changes to commercial practices to facilitate a smooth transition into day-to-day operations.

They warned that if the current regulatory climate does not improve, the company may be forced to make more difficult decisions in order to ensure long-term stability.

SPAR is one of several retailers expressing concern over the sustainability of the price margin freeze.

CBA's communications director commented that the prolonged enforcement of such measures could inflict irreversible damage on domestic commerce.

He pointed out that many of CBA’s products fall under the margin restrictions, indicating that they would face significant losses if they continue to operate under the same conditions.

The threat to smaller shops is also highlighted, with fears that the closure of domestic retailers may jeopardize local stores and the supply to smaller settlements.

An official from the Hungarian National Association of Commerce echoed this sentiment, noting a shift where consumers might favor larger discount and supermarket chains for cheaper products.

The price margin freeze has prompted several supermarket chains to announce quantity restrictions on affected items, effective from the upcoming Monday.

SPAR stated that customers would be limited to purchasing a maximum of 3 kilograms of the specified items and further restricted on other products, with limits of 10 units for items exceeding 1 liter or 1 kilogram.

LIDL has stated that customers will not be able to buy products affected by the price margin freeze if they request a VAT invoice.

Tesco has instituted similar measures, allowing customers to purchase only one carton of milk and up to four units of dairy products per customer.

Reports indicate that the introduction of quantity limits has significantly affected retail prices of basic food categories.

An analysis comparing data from March 13 and March 17 shows varied price changes resulting from government intervention, with some products experiencing price decreases over 60%.

Among the nearly 1,000 product types listed, almost 800 have seen price drops following the government's action.

While the Minister of Economic Development guaranteed a 10% reduction, some items reported price reductions as high as 64%.

However, some products did see minimal price increases.

The measures, including the price cap, are expected to lead to significant consumer savings on 30 food categories, covering over 1,000 products.

Initially, these items had an average margin exceeding 30%, which is anticipated to decline to nearly 9%.

It is projected that the impact on food inflation could see a reduction of 2 percentage points, with demand expected to increase by 15-20% in the affected categories.

Industry experts have noted a halt in price increases for several product types.