Pressure grows on Spanish retailers over price hike

Spanish retailers have reacted strongly to accusations that they artificially inflated the prices of various fruit and vegetables in September, saying that the increases were due entirely to the hot weather reducing the size of harvests.

The staggering increase in cost - between 25 and 50 per cent - for certain products such as lettuces, salad tomatoes and green beans has prompted the Spanish competition authorities to begin an investigation into the business practices of the retail trade. Although prices for these products increased across Europe as a result of the hot weather, the rise in Spain was far higher than elsewhere.

But Asedas, the organisation which represents Spain's supermarkets, told the Cinco Dias​ newspaper that many store operators had in fact absorbed the increased cost of many products due to reduced harvests, and that most had increased the final sales price enough to simply maintain their margins.

"The fierce competition between retailers in Spain means that they all want to be the last, not the first, to increase prices as this gives them an advantage over their rivals,"​ said Ignacio Garcia Magarzo, head of Asedas.

He also denied allegations that the leading supermarket groups had in fact agreed to increase prices across the board, allowing everyone to benefit from higher margins under the guise of reduced demand. Such price fixing agreements are illegal under Spanish and European legislation.

Justified or otherwise, the price rises have been roundly criticised by both consumer groups such as the Spanish vegetarian society and organisations representing the supermarkets' suppliers, such as COAG.

The latter said that farmers and growers had not benefited at all from the increased prices, a clear contradiction of the supermarkets' claims that the rise were necessary because suppliers were charging more for their produce.

Farmers have long complained of the power of the retailers when it comes to setting prices, and COAG said that the heat wave was being used by the store operators as another convenient excuse to expand their margins even more.

The reduced crop yields because of the hot weather have, if anything, placed farmers in an even weaker position when it comes to negotiating with the retailers, the organisation said. Far from demanding higher prices, farmers are being forced to accept even lower prices or face having no market at all for their products COAG claimed.

The organisation criticised the Spanish government for taking so long to begin its investigation into retail prices - it had promised to do so a year ago without acting - and called for a number of measures to be introduced to make pricing more transparent.

These include the labelling of both producer and retailer prices on food products so that consumers can see what the mark up is - and whether rises and falls in farm gate prices are reflected in the final cost of the product - as well as greater transparency regarding the various factors which influence the final supermarket price, such as distribution and production costs.

It also called on the authorities to play a more active role in ensuring that the contracts between suppliers and retailers were fair and equitable.

COAG's sentiments were echoed by those of the UPA, the agricultural organisation whose members include many of the small and medium-sized growers most affected by then growing strength of the Spanish retail trade.

UPA said the consolidation of the retail industry in Spain had not been checked by the government, leaving just a handful of retailers in a very strong position from which to negotiate on prices.

The organisation said that profit margins on non-processed products such as fruit, vegetables and meat were far higher than those for processed products because of the power of the retailers compared to the often small or medium-sized suppliers of these products and despite the fact that such high margins cannot be justified by production costs.