Cheaper food means trouble for retailers

photo - PR

Over the past year, inflation has remained low in Poland and food prices are one of the main factors that contribute to it. In June prices in this market segment fell by 0.3 percent compared to May.

The biggest drops were recorded for sugar (3.7 percent) and fruit (2.9 percent). Other categories, such as rice, bread, yoghurt, were not far behind.

The trend, which is expected to continue in the coming months, has already had its effect on retailers.

One of Poland's largest supermarket chains, the cut-price Biedronka, owned by Portuguese Jeronimo Martins, recorded a 1.2 percent drop in like-for-like (LFL) sales revenue in the first half of 2014.

Shares in the parent company lost in value immediately after the financial report was published.

Until this year, Biedronka's LFL revenue had been growing, by as much as 20 percent in 2011. It started declining in the first quarter of 2014. The company attributes the change mostly to prices and a high level of competition in Poland.

As Gazeta Wyborcza reports, networks such as Biedronka and its main rival Lidl are turning towards tools such as regional promotions and the introduction of new products in order to keep the revenue growing.

They are also increasing their advertising, not only to bring in new customers, but also to convince them to put more into their shopping cart. (kw/pg)