Retailers say excess store space not major driver for food price inflation
While plenty of new supermarkets and other stores have opened up in Estonia in recent times, this is not a major factor in the ongoing soaring food prices, some industry players say.
Prime Minister Kristen Michal (Reform) recently stated that higher than needed volumes of retail space in Estonia were one factor behind continued high food prices.
However, Nele Peil, head of the Estonian Traders' Association (Kaupmeeste Liit), rejected this claim, telling "Aktuaalne kaamera": "If a retailer has high costs, whatever those may be related to, then, yes, that affects food prices, but it is not right to claim that the reason for high food prices is the abundance of stores; that statement is not correct."
Chief economist at Swedbank Tõnu Mertsina also thought an abundance of stores was not a major factor in food price inflation.
"The share of rent for retail chains is not so large that it alone would be a highly important factor, requiring price increases. We should also consider how much the prices of purchased food items cost. So there are quite a few factors here," Mertsina said.
Selver's head of business accounting, Kristjan Anderson, however, did see the addition of stores exerting an impact on price increases. "For a population of 1.3 million, nine different food store chains operating across the country — at first glance, that does seem like a lot," he said.
The country's small population means a small market share is untenable, compared with a similar share in a larger market.
"What the retailer is chasing is volume. With a 1 to 2 percent market share in this small country of a million, you're not really a player. Volume is what allows you to get a lower level [of price] for the purchase of goods. Every market player strives for that," Anderson went on.
He put the figure of grocery stores in Estonia at present at 780, covering a total of 670,000 square meters of sales space. Supermarket chain Coop CEO Rainer Rohtla had recently put the figure at about 700.
Over the past 12 years, 270 stores with 240,000 square meters of space have been added to the stock.
Peil noted from the customer perspective too, there needs to be a proportionately high amount of retail space, "partly because we are a sparsely populated country and people in small places must also have access to a store. This statistically increases the space per person, but it does not mean we have too many stores. In fact, there is strong competition in Estonian retail and that tends to keep prices down rather than drive them up."
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Editor: Valner Väino, Andrew Whyte
