Real food prices declined by seven per cent in Finland between 1994 and June 2016, Ilkka Lehtinen, a senior adviser at Statistics Finland, writes in a blog.
The decline represents cost savings of 210 euros per year for the average consumer – a consumer spending 3,000 euros on food every year, Taavi Heikkilä, the managing director of the S Group, reveals in an interview with Uusi Suomi.
The decline in food prices has also been more rapid in Finland than on average in other member states of the European Union, adds Lehtinen: Food prices have over the past three years dropped by 4.8 per cent in Finland but only by an average of 0.9 per cent in the European Union.
Regardless of the decline, he adds, food prices in Finland remain among the highest in Europe.
Heikkilä reminds that the value-added tax on food items is relatively high in Finland: value-added tax currently accounts for 14 per cent of food prices in the country but only for an average of 5 per cent in the European Union. “The comparison would be particularly favourable for us if our tax rate was at the same level as elsewhere,” he states.
The decline in food prices is according to him attributable to a variety of factors, such as over-production, the problem of which has only been exacerbated by the economic sanctions imposed on Russia.
The S Group, he points out, has also streamlined its operations in order to be able to bring down food prices. “The S Group has also launched a price reduction campaign. We've improved our efficiency and pared down costs, thus allowing us to lower our mark-up. That's how we've tried to get a competitive advantage over other [operators],” says Heikkilä.
Lehtinen similarly estimates that the drop in food prices is attributable not only to a general decline in consumer prices but also to intensifying competition between food producers and retailers.
The Finnish Commerce Federation reported last week that the sales of consumer goods rose by 1.4 per cent over the first six months of the year.
“We've seen negative figures for the past couple of years,” comments Heikkilä. “All retail sales stood at -2.5 per cent last year. It's definitely important that the prefix has changed. There have been some positive signs.”
The S Group, for example, registered an increase of 4.2 per cent in its sales between January and June, largely as a consequence of price reductions and the de-regulation of opening hours, gauges Heikkilä.
He believes it is vital to bolster the purchasing power of consumers in order to ensure retail sales remain on the up-tick. “The tax concessions laid out in the competitiveness pact make sure that the overall effect is positive. It's very important that no measures that gnaw away at purchasing power and reverse the positive trend are adopted in the budget session,” he says.
Aleksi Teivainen – HT
Photo: Roni Rekomaa – Lehtikuva
Source: Uusi Suomi