Spanish probe shows mark ups are reasonable, for now

Related tags Fruit

Investigations by the Spanish competition authority, the SDC, into
the price of fresh fruit and vegetables has confirmed that most
retailers regularly include a substantial mark up on these products
but that this is in line with the additional costs accumulated
between the farm gate and the supermarket shelf.

The SDC, part of the Spanish finance ministry, began investing retailers' pricing policies in the autumn after steep increases in price for a number of fruit and vegetable products.

The retailers said that the price hikes were a result of reduced supplies of many of these products because of the hot European summer, which had destroyed large numbers of crops. But with the price increases in Spain far higher than across the rest of the Continent, the SDC decided to begin a wider investigation into whether the retailers had deliberately sought to boost their margins.

The preliminary results of this investigation were revealed earlier this week, show that the increases are, for the most part, in line with the costs incurred.

The SDC's investigation focused on six products - tomatoes, lettuce, green peppers, green beans, pears and apples - which were the most affected by the price hikes. It also looked at prices for these products in the national and international markets, and also compared to other similar products.

According to the SDC, the price of fresh fruit and vegetables in many retail outlets includes a mark up at every stage of the supply chain, but that these reflected fixed costs - such as transport or packaging - which were justifiably passed on to consumers.

But supermarkets' margins were not found to be any higher than those of operators further down the supply chain - such as wholesalers - varying between 40 and 90 per cent in most cases, but with one-off increases as high as 200 per cent for some products such as apples in October 2003. However, the SDC suggested that some of the price increases between wholesaler and retailer were less justified than lower down the chain.

One of the principal aims of the investigation by the SDC was to determine whether the retailers acted together to keep prices artificially high - the only grounds on which the authorities could take action against them - and while the preliminary results suggest that this was not the case, the SDC investigation will continue until October before drawing any final conclusion.

The SDC confirmed that the heat wave and increased demand for fruit and vegetables during the summer were certainly contributing factors to the sharp price increases, but was clearly not convinced that this alone could justify the huge percentage increases in some cases.

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