The Ministry of agriculture has developed a draft government resolution, according to which the regions lose the right to establish trade margins on baby food, the Ministry said. The document has been coordinated with interested ministries and departments and after the approval of the Ministry of justice will be submitted to the government. Most likely, it will occur at the beginning of 2017. The FAS and the Ministry of economy confirmed the approval of the document.
Regulation of trade margins does not actually have a statistically significant impact on the price of baby food, and in some regions where regulation is not present, baby food is cheaper, explains the assistant of the Head of the Ministry of economy Elena Lashkina. Thus, according to the Ministry, the regulation of margins for baby food may lead to higher prices for other goods due to shifting of trade network costs and reallocation of trade margins. The Ministry of industry and trade did not respond to a request.
If we do not cancel the limiting of the margins, it is possible there will be a sharp reduction in the range of baby food in the regions where they have maximum margins, report in the Ministry of agriculture.
"First of all, it will affect the cheapest and the least turnover items such as specialized products intended for feeding children of early age with various deviations in health", — explained in the Ministry. There's also predict that the compression of the trade channels may lead to the exceptions of baby food from the range in a separate retail formats that will lead to a reduction in sales to 35%.
The situation is aggravated with effect of 1 January amendments to the law "On trade", limiting to 5% the allowable size of prizes and bonuses that retailers can take from suppliers. To meet this requirement, market participants differentiate the cost of products of the manufacturer depending on the additional costs incurred by retailers for the delivery, storage and sale of goods, say in the Ministry of agriculture. For baby food such a tool will be unavailable due to parallel action of maximum trade margines. One of the major baby food manufacturers has already faced a decline in the volume of purchases from the retailers, said its representative. In the other major trade network it has been confirmed that due to the current limitations selling of baby food became almost unprofitable.
The cancellation of limiting the trade margins in the regions will eliminate the uneven regulatory approaches, convinced the Executive Director of "RusBrand" Alexey Popovichev. The President of the Russian Union of juice producers Natalia Ivanova notes that ten years ago, the limit of the margin by regions was justified, but now this approach is irrelevant.
According to BusinessStat, in 2012-2014 sales of baby food in Russia grew by 0.6 and 1.1% annually, but in 2015 the demand for it declined and the market fell by 3.9%, reaching 1.36 million tons. From July 2015 to June 2016 sales rose in money by 9%, according to Nielsen. According to analysts, the three leaders on the baby food market in Russia include "Progress" (brand "Frutonyanya") with a share of 34.2% in real terms, Pepsico (21,6%) and Nestle (2.9%).
The regions received the right to limit the margin on baby food in 1995. So, in Nizhny Novgorod region since 2006, the maximum level of trade margins is set at 20% to the actual price of delivery. "We consider the current mechanism of regulation of margins on baby food to be effective because it is an additional measure of social support of the population" — say in the regional tariff service. Supervisor of agro-industrial complex, Vice-Premier of the government of Voronezh region Victor Logvinov also believes that it is risky the release the margins on baby food. Acting Minister of development of competition and economy of Ulyanovsk region Vadim Pavlov notes that for recent years, none of the trade organizations asked to review the margins (in the region they make up 20-25%).
In Danone, PepsiCo, X5 Retail Group, GK Dixy, the Association of retail companies they declined to comment. "Progress" did not respond to a request. Nestle did not provide any comments on the issue.
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