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The cost of living increases, Albanians order towards cheaper products and offers

2023-03-25 09:03:29Biznes SHKRUAR NGA REDAKSIA VOX
The cost of living increases, Albanians order towards cheaper products and
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Since last spring, prices have been rising at their highest rate in 25 years as consumers adjust, opting for cheaper alternatives, taking advantage of deals, buying smaller quantities and turning to some local products that cost cheaper than imports.

The orientation of consumption towards cheaper products is likely to undermine food security, especially in regions of the country, where purchasing power is lower and control agencies have less influence.

Since April last year, food prices rose at double-digit rates of over 10% after almost two decades of stability. Last year, average annual inflation increased by 6.7%, but food prices rose at twice the rate, 12.5%.

The price increase in the main products of the basket greatly affects the behavior of consumers in the country, since Albanians spend 41.3% of their monthly expenses on food. The large weight that food has in consumer spending is being reflected in the retail trade.

Robert Hoxha, representative of the "Big Market" supermarket chain, said that due to high prices, the trend towards the consumption of products that cost less is seen. The trend was confirmed by most lines of retail trade in the capital.

The middle class is oriented towards cheaper alternatives

With the prolongation of the war in Ukraine and the negative impact of climate change, supply chains have been further damaged during 2022, as inflation has entered a new normal and will remain so for a long time.

In our country, the middle class, which owns the purchasing power in specialized units (supermarkets), is abandoning the purchase of quality products, making purchases in cheaper alternatives.

For example, in oil, pasta, rice and dairy products, the cheapest series are sold.

Substitution is happening more in dairy and oil products. Oil and dairy prices, after the war in Ukraine, have more than doubled. Samiu, who has a sales unit in the Madrasah area of ​​the capital, claims that customers who used to buy processed dairy products from factories have now increased their demand for milk from villagers.

While the increase in the price of industrial oil shifted consumption to olive oil, whose price, due to overproduction, almost equaled that of sunflower oil.

The President of the Chamber of Commerce and Industry, Nikolin Jaka, says that the lack of purchasing power, which has been further damaged by inflation, is orienting consumption towards cheaper products. According to Mr. Collar, this trend carries a risk, as production is encouraged to be oriented by demand.

By producing cheaper goods the economy is likely to spiral down the value chain, said Mr. Collar. He proposes that wages should rise in both the business and administrative sectors in order to keep consumption in balance.

When prices were stable, consumers tended to buy some imported products, eg, apples, oranges or greens, believing in their quality. But the increase in prices has shifted preferences to the country's products.

"Now the middle class consumers are oriented by the price and not the quality", - claimed one of the largest retail outlets of greens in the Commune of Paris, one of the areas with an above average economic level in the capital. Retailers claim that the trend towards cheaper products is evident across all basket items.

The era of high prices is a global phenomenon. Consumers are exhibiting similar behaviors all over the world. A Euromonitor survey noted that the cost of living crisis has caused a shift in consumer priorities.

More and more people are prioritizing value over brand loyalty. The survey showed that 24% of global consumers systematically searched for low-cost goods in 2022, up from 18% in 2021, and this trend is increasing in 2023.

Purchase quantities decrease

Consumers have reduced the amount of purchases due to the increase in prices. For example, if earlier, supplies for basket items were made in several kilograms, now supplies in quantity have declined, claim retail traders. Supplies that have been purchased for a long time have been avoided.

Mostly, the change in shopping habits is happening in the middle class, since above this level, consumers have kept the approach unchanged.

The smaller quantities of purchases are also confirmed by foreign trade data. The official data of INSTAT show that, in January of this year, the quantity of food imports decreased by 13%. 45 tons of food were imported, up from 52 tons that were imported in January 2022. Albania is still a net importer of food.

Imports in value are three times higher than exports. Most of the needs are met with imported food. The decline in imported food quantities started last year, reflecting a lack of purchasing power.

Last year, food imports in quantity suffered an annual decrease of 7%, while in value, they increased by 14%. This means that last year Albanian consumers spent 14% more on imported food, but consumed 7% less.

Sales increase with offers

Now the corners of supermarkets with offers are the most frequented. Managers indicate that previously, offers were preferred by a quarter of buyers, but now this percentage has increased. Consumers have become more attentive to the opportunities offered by prices, often changing the place of supply.

In Tirana, the markets known for cheap prices in Kombinat and the former Dinamo Plant now have more buyers. Food traders in the former Dinamo Factory, who retail at least 30% cheaper than in other markets, claimed that this year, they are seeing a new category of customers. "There are lawyers, economists, etc., who are being supplied at my points, who did not come before.

Pensioners and the poor usually came here because of the cheaper prices", said Adriani, who owns a unit that sells wholesale and retail food products. He claims that the geography of buyers has also expanded, as there have been more customers from distant areas, from the Commune of Paris, Fresku, etc., who come to buy because of the cheaper prices.

With incomes on the rise and prices on the rise, consumers everywhere in the world are turning more and more to bargains and free markets. Euromonitor's survey revealed that 31% of global consumers planned to increase their shopping at discount stores.

Supermarkets that sell cheap goods are rapidly increasing customers all over Europe. Globally, takeaways are expected to account for 10.6% of total grocery sales.

Consumption in bars, restaurants and hotels falls

The increase in the prices of basket items has led to a chain reduction of consumption in all goods and services. High living costs are reducing consumption in bars, restaurants and hotels.

Businesses in the sector claim that now, people tend to eat meals at home and reduce the number of coffees at the bar, a habit that dominates the routine of Albanians.

Enri Jahaj, who leads the Association of Bars and Restaurants in our country, claimed that the increase in the cost of living has led to a 30% decrease in consumption in bars and restaurants. Now a large majority of people are consuming coffee at home, a habit that was dictated by the Covid-19 pandemic and continues even now. Restaurants and hotels are facing the same situation.

One of the fish restaurants in Golem claimed a drastic decrease in consumption during the weekend this year, which according to the administrator is coming from the reduction of the population and the increase in the cost of living. "People who used to eat at our restaurant every week before the pandemic, now visit us once a month or every two months."

The largest hotel unit in the country, "FAFA Resort", confirmed a decrease in overnight stays at the weekend. Before the cost of living rose, weekends were two or three days, but now they have been reduced to one night.

Inflation hits the poor hardest

Households in the 20 percent of the population with low incomes are the hardest hit by inflation. More than 33% of the population in Albania, nearly 1 million inhabitants, are exposed to food insecurity according to the estimate made by the Food and Agriculture Organization of the United Nations (FAO) in the study "Food Security in the World 2021", i recently published.

Albania ranked first in Europe for the large number of food insecure population, comparable only to some African countries.

Because of this fragility, the population of our country is exposed to global crises and high import prices. The high profile of poverty further exposes the population.

The World Bank, in a special regional analysis, found last year that the inflation trend in Albania reflects more the price change in the middle class, as the poor face higher costs.

The weight of food expenses in poor families, depending on the location, reaches up to 60% of monthly income, so high prices increase the cost of living for the poor.

In Albania, the high costs of basket products are dictated by food insufficiency, which means that domestic production in food chains is not sufficient to meet the needs.

All Western Balkan countries, except Serbia, are net importers of food. Most of the countries in the Western Balkans do not assess the degree of food self-sufficiency every year, reported the Network of Regional Cooperation in the Agriculture Sector (SWG) in a comparative study on the capacities of the agricultural sector of 6 countries of the Western Balkans (Serbia, Bosnia, Macedonia and North, Albania, Montenegro and Kosovo).

SWG estimates that only Serbia has detailed and updated data on food self-sufficiency. The data show that in the Western Balkans, only Serbia has self-sufficiency in most agricultural products.

Albania has sufficiency in the production of eggs and tomatoes, and North Macedonia in peppers and tomatoes. Bosnia-Herzegovina is self-sufficient in plums, raspberries, trout, apples, pears, while meeting a large part of the needs in milk, chickens and sheep.

Kosovo is self-sufficient only in plums, and is about 80% self-sufficient in dairy products and some types of vegetables. Montenegro, as a tourist destination, does not have enough food products, except for wine.

Rising prices, at all times, have shown almost the same effects as wars and pandemics. High prices turn into predators that quickly erode incomes, especially for the poor.

The International Monetary Fund, in its latest review of our economy, recommended that public funds be directed as support for the needy, instead of unfeasible concession contracts and large infrastructure projects.

The spiral of prices can affect, among other things, also food safety, since many companies to keep costs under control, have started to speculate on quality and quantity./Monitor

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