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Lithuanian PM, a presumable presidential hopeful, set to curb grocery price growth

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Linas Jegelevičius for the BNN

Having chastised food retailers on many occasions for high grocery prices, Saulius Skvernelis, the Lithuanian Prime Minister, stepped forward in the bid to harness local supermarkets. The presumed presidential candidate of the ruling Farmers and Greens (LVŽS) has summoned this week executives of major retail food chains, scolded them and reaffirmed his pledge to rein in the edging up prices.

Before, PM spearheaded a plan to set off the big players’ dominance by strengthening small and medium-sized grocers (it was purposely or not leaked), proposed a VAT cut on food products and, this week, invited foreign retailers, including Germany’s Kaufland, to invest into Lithuania.

«Indeed, Skvernelis, as the most likely presidential candidate of the ruling party, is smart prioritising the topic of food prices. Their growth is an acute topic to all and his efforts to reduce them play out well with voters from different electoral layers. The intent is populist, yet can be efficient in garnering support in the election,» Lauras Bielinis, a political analyst and associate professor at Kaunas Magnus University, told BNN.

After the meeting on Wednesday, PM continued to criticize supermarket operators, claiming that they did not say «anything new».

«Essentially, I heard the same, i.e. that all (regarding the prices) here is well functioning, that Lithuania remains one of the EU countries with the lowest food prices, that we do no face any problems and so on. I really cannot agree with that, therefore the Government has already scheduled a meeting next Wednesday to consider concrete plans and measures aimed at increasing competition and fostering small and medium-sized businesses,» Skvernelis said. He added: «It is difficult to refute the fact that over the last seven years food prices grew at a speedier pace than the prices of feedstocks and the import. However, our food retailers are denying it».

Asked by reporters how he intends to put prices under control, Skvernelis mentioned the necessity to strengthen small and medium-sized food vendors, increase competition in the trade sector, and to attract more investors to the market.

«I will sign a letter this week, inviting 12 major investors from EU states, operating retail chains, to come and invest in Lithuania as the government’s decisions now allow investing, having safe investment conditions, having good return on investment, and these decisions will be made,» he told journalists after a meeting with representatives of major retailers in Lithuania.

During a meeting with visiting German Chancellor Angela Merkel last Friday Skvernelis invited German retail chain Kaufland to come to Lithuania, although the chain had said it is not interested in Lithuanian market for now.

Today, the other German retail chain, Lidl operates in Lithuania, which, alongside Kaufland, belongs to the same German retail group, Schwarz Gruppe.

When meeting Merkel, Skvernelis emphasised that Lidl’s arrival has increased competition among shops, which created preconditions for prices to decline, and that it would be even more beneficial for Lithuania if Kaufland came as well.

PM especially criticised the Competition Council that is in charge of monitoring competition in the country.

«I really think it works poorly. I believe they do not defend interests of consumers,» Skvernelis noted.

Meanwhile, representatives of Lithuanian retail food chains were cautious reflecting on the PM proposals on competition increase and disapproved the Government’s proposal to close supermarkets on Sunday.

«I understand that the issue of food prices is an acute topic for Lithuanian people and the Prime Minister, too. However, the increase (of prices) over the course of the last four years has been relatively insignificant. According to Eurostat, the prices went up 5.3 per cent over the period and upped 4.2 per cent after the adoption of the euro. As the leader of the market, I want assure that changes of our prices will be minimal,» Kristina Meidė, head of Maxima LT, said.

She, however, expressed doubt over PM’s intent to invite 12 Western retailers to Lithuania.

«I just simply do not see any room for them,» she said.

The CEO argued that namely large food retailers offer lower prices, not the small ones.

«It is so because we can acquire goods and feedstock from which our items are produced at lower prices,» she accentuated.

Meidė also thumbed down the PM proposal to close food supermarkets on Sundays, saying that Maxima employees, as well as the small businesses operating at the supermarkets would suffer as a result.

«At the end, we would definitely see an adverse impact on the state budget,» the Maxima CEO cautioned.

«We have to consider that, in Lithuania, namely weekends are the days when people do their groceries. Also, do not disregard the fact that supermarkets have become hubs of amusement and entertainment, for families, too, so closing them would have a multiple negative effect,» Meidė noted.

According to her, there are 940 small businesses, including 147 pharmacies, in Maxima supermarkets across the country.

Radostinas Roussevas-Peinas, the chief executive of Lidl Lietuva, a subsidiary of German retailer Lidl, argued that the best remedy in slashing food prices is through bigger competition.

«When we came to the Lithuanian market two years ago, they dropped. We realise that with 38 shops open across the country we have a considerable impact on local economy and that, with a new shop opened, we thus increase competition, which reduces prices at the end,» he underlined.

Meanwhile, Gerardas Rogas, GM of «Palink», which operates «Iki» supermarkets, mulled that a reduction of VAT on food products would benefit the striving of lesser prices.

«This is essential in the effort,» he accentuated.

Market experts, like Žilvinas Šilėnas, President of Lithuania’s Free Market Institute, are nevertheless sceptic whether the introduction of the PM proposals aimed at reining in food price growth would produce desirable results.

«On one hand, we are talking about increase of competition in the market which would come with the arrival of new food retailers. And on the other hand, we are speaking about helping small vendors. How are these two (strivings) compatible?» questioned Šilėnas. «To my opinion, the plan is raw, little discussed. When hearing our prime minister, I see more reasons for foreign retailers not to come here than enter into our market».

Yet the Skvernelis resolve to curb food prices is music to ears of many Lithuanians, analysts say.

«Indeed, it is a populist thing, but it echoes well with the population,» Bielinis, the analyst, said. «The striving will certainly become one of the basic elements, one very vivid, of his presidential campaign».

«However, the success of his presidential bid is hinged on a lot more things than just prices. Much depends on how far his fight against the retailers would go and how much attention it would generate in media,» the analyst underscored.

Skvernelis is one of the top three presidential contenders in Lithuania, according to Lithuanian polls. Economist Gitanas Nausėda, who has already announced his presidential run, sits on top of the polls. Kaunas mayor Visvaldas Matijošaitis, who did not reveal year his decision for the 2019 election, is second and Skvernelis is third.


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