The primary reason for the rise in food prices between 2021 and 2023 was an increase in producer and import prices. Additionally, large retailers saw margin growth due to higher gross labor costs, which in 2024 were 42% higher than in 2021, despite reduced taxes on wages.
Importers and distributors experienced a greater increase in net profit margins compared to large retailers. Total productivity declined by 3.3%, and when wages rise faster than productivity, price increases are inevitable.
The Analysis of Prices and Operations of Retail Chains in Montenegro, prepared by the state Economic Faculty for the Chamber of Commerce, revealed that the rise in prices of imported food and increased wages in retail led to higher food and beverage prices than expected.
According to Monstat, food and beverage prices rose by 7.2% in 2021, 28.9% in 2022, and 1.7% in 2023, with a cumulative increase of 40.5% over three years.
The report attributes the significant rise in food prices to a 23.8% increase in imported food prices in 2022 and an 11.2% rise in fuel prices. In 2023, the increase in food product prices slowed to 1.7% while fuel prices decreased by 0.3%.
The analysis shows that 40% of margin revenue from large retailers went to wages. The average gross salary in retail rose from 586 euros in 2021 to 1,039 euros by November 2023. Despite nearly constant margin percentages, the revenue in money terms grew due to higher product costs.
In 2021, the average gross margin of large retail chains was 25.01%, 25% in 2022, and 25.27% in 2023. The net profit margin for these chains increased from 1.26% in 2021 to 3.38% in 2023, driven by higher revenue from gross margins and increased sales.
Importers and distributors experienced a greater increase in their gross margin, rising from 19.92% in 2021 to 23.54% in 2023. Their net profit margin increased from 3.62% in 2021 to 5.6% in 2023, which was significantly higher than that of retail chains.
The analysis also highlighted that consumer prices are at least double the initial price due to taxes, margins, and other costs. For example, a product costing 1 euro could be subject to import duties, a 23% importer margin, and a 25% retail margin, eventually increasing the price to 2.05 euros after taxes.
The document also addressed the impact of limiting margins on food products in Montenegro. While it temporarily reduced prices, it did not stop inflation as retailers increased prices on non-regulated products.
The retail sector is the largest employer in Montenegro, with 157,000 employees, 36% of whom are in retail. The analysis stresses the importance of the retail sector and warns that interventions like margin restrictions could affect employment, business operations, and living standards.
If the government intervenes to limit gross margins to 10% for large retailers, the analysis predicts that retailers would incur losses. This would likely lead to the removal of goods from the market and an increase in prices for non-regulated products, possibly resulting in job losses, reduced wages, and a decline in GDP.
A group of citizens, Alternativa, called for a boycott of the “Voli” retail chain from February 17 to 24. As a result, “Voli” informed producers it would reduce the quantities it planned to purchase. The Tax Administration reported that the boycott led to a 30% drop in sales compared to the previous Saturday.
