According to an expert, the quality of food sold in Hungarian shops is often worse than those sold in Western Europe. The best way for businesses to cut prices is to produce lower-quality products or reduce package sizes: which is what’s happening in Hungary.
Average price level of food and beverages in Hungary lower than EU average
A CBA store in Hungary. Photo: MTI/Balogh Zoltán
Zombor Berezvai, an assistant professor at Corvinus University of Budapest, told Agrárszektor that “we are not doing well in international comparison,” adding that the Hungarian food industry is generally less efficient and productive than its regional competitors. However, he also added that in general, it is misleading to say that food is more expensive here than elsewhere.
This is supported by Eurostat data, which clearly shows that the average price level of food and non-alcoholic beverages in Hungary is still significantly below the EU average, namely 90% of it. The article recalls that the Hungarian National Bank (Magyar Nemzeti Bank, MNB) has repeatedly pointed out that the efficiency of the Hungarian food industry lags behind the productivity of major European countries, which undoubtedly makes products produced in Hungary more expensive.
Everything is more expensive in Hungary than elsewhere – or is it?
Photo: Daily News Hungary – Vivien Rima ©
Moreover, the Hungarian food industry faces a higher interest rate environment if it wants to invest or develop, Agrárszektor explains. This is exacerbated by high VAT levels and the volatility of the forint against the euro and the dollar. In many cases, companies react to the latter by expecting a higher exchange rate because they do not want to lose profit due to unpredictable exchange rate movements.
Indeed, this does not only affect imported products but also domestic products, which adjust their prices to competing imports, due to competitor-oriented pricing. These would justify products costing more at home than abroad. However, even if firms produce more expensive products, and even if VAT is higher in Hungary and the exchange rate is less favourable, if they reflect this in their prices, it will significantly reduce demand.
Lower-quality products, smaller packaging
Shopping in Aldi, Hungary. Photo: Daily News Hungary
“This is where demand-driven pricing, consumers’ purchasing power and willingness to pay enter the picture,” the expert said. According to him, this may be why prices for many products do not end up being higher in the country. However, the only way for companies to reduce prices is to produce lower-quality products or reduce package sizes.
“I think the former is the reason why the quality of many products in Central and Eastern Europe – and therefore in Hungary – is lower than in Western Europe, and why the size of packages is often smaller and smaller. That’s just how things add up,” concluded Zombor Berezvai.
Read also: