Two of Montenegro’s four large retail chains have told domestic food producers they will not accept higher purchase prices, while a third has conveyed a similar message verbally. Representatives of the producers confirmed receiving the messages and warned that being unable to adjust prices as costs rise could threaten domestic food production.
The letters were sent in the past two days to suppliers in the dairy, bakery and meat industries. Producers said they were surprised by what they called an “extortionate approach”. The letters arrived after the government announced it would limit retail margins from 1 January.
One foreign retail chain wrote that, after reviewing economic indicators and trends in the consumer-goods market, it had decided to maintain existing purchase prices and price lists. It will not accept price increases or changes to supplier price lists that raise prices through 30 April 2027, the letter said.
The chain called on suppliers to align their business activity and pricing policies with that decision, while expressing an expectation of continued stable and successful cooperation. One domestic retailer separately notified producers that it had changed its procedure for supplier purchase-price revisions.
Under the domestic chain’s revised procedure, suppliers must provide detailed reasons for requested increases, but the retailer is not obliged to accept the explanation and decides independently whether to change shelf prices. It said a purchase-price increase “does not automatically justify a retail-price increase”; new supplier prices can apply only after the request is reviewed and the executive director gives written approval.
Producers said the previous practice was to notify a retailer several days before a purchase-price increase and provide recommended retail prices. They received the new messages while negotiations between businesses and the government over the “Euro model” were still under way.
Higher costs and price changes
The model envisages higher minimum wages and a substantial increase in labour costs across sectors, including manufacturing. Producers warned that record fuel and transport prices, expected increases in raw-material costs and higher wages could push domestic food producers out of business.
An industry representative said one retailer had raised retail prices on 4,000 products by 10% to 20% seven days earlier, building up revenue ahead of the “Euro model”. The same chain would not accept higher purchase prices through the end of April next year, the representative said, leaving manufacturers to supply goods below their new cost price or face removal from shelves.
Wages at domestic dairies, bakeries and meat producers are currently between 800 and 1,000 euros, according to the representative. The future minimum wage for employees with secondary education would be 1,250 euros, they said, estimating that producers’ labour costs could rise by 25% to 56%.
Producers estimated that retail prices would need to rise by 13% to 20% for them to remain at the same level. Keeping current prices, an industry representative warned, would mean operating at a loss and could lead to the closure of domestic production.
For a bakery, producers said, if a worker’s pay rises from about 850 euros to 1,250 euros, the price of the bread that worker makes would need to increase from 90 cents to 1.10 euros. A dairy selling a litre of yoghurt to a retailer for 90 cents would need a new purchase price of 1.1 euros, they said.
Food-industry representatives said retailers were already raising their own prices, so margin limits would apply to those higher amounts, while producers were not being allowed to reflect actual cost increases. They added that retailers did not distinguish between domestic and imported goods on shelves, and that imports did not face higher labour costs and could provide retailers with higher margins. The economic damage would be much greater if the measures weakened domestic production, they warned.
Draft law remains unadopted
The Ministry of Agriculture began drafting a law against unfair trading practices in the food supply chain early last year, but the draft has not been adopted. It was planned in line with European Directive 2019/633.
The directive prohibits payment delays of more than 30 days for fresh and perishable food, unilateral and retroactive changes to contracts by buyer-retailers, and last-minute cancellations of orders, particularly when goods have already been produced. It also prohibits requiring suppliers to pay for promotion, marketing or storage of products at retailers.
Other practices covered by the directive include refusing a written contract when a supplier requests one, and pressuring producers through low purchase prices or threats to remove their goods from shelves. The domestic draft law remains pending.
