Increase in Flour and Chicken Egg Prices in Retail Chains Due to Rising Acquisition Costs, TCA

The Armenian State Commission for the Protection of Economic Competition reported that, as of September 27, significant monitoring revealed that some major retail chain-owned trading facilities recorded an increase in the price of 1 kg of flour (approximately 7%), as well as the prices of chicken eggs.

To identify the causes behind the price increases of these products, studies were conducted, which led to the following findings:

Flour

Major retail chains maintained the profitability levels from the sales of this product category until the declaration of the martial law, and the increase in flour prices is attributed to rising acquisition costs. According to information provided by two major flour producers, the prices of wheat purchased by these companies significantly increased (the proportion of wheat in the cost of flour production is about 80%). In early August 2020, these businesses purchased wheat from Russia at 84 AMD per kg, while in November it reached approximately 104 AMD (around 24% increase).

Furthermore, it was recorded in an analysis of information presented by the State Revenue Committee (SRC) that, apart from the Russian Federation, operators also imported Russian-origin wheat from a third country, namely Georgia. Payments for the wheat purchased from Georgia are made in US dollars; therefore, the depreciation of the Armenian dram against the dollar has also impacted the rise in import prices. The Commission noted that wheat imported from Russia is often also acquired in US dollars.

Chicken Eggs

The increase in chicken egg prices in major retail chains is also attributed to rising acquisition costs. According to information provided by four major egg producers, they have raised sales prices due to increased production costs of eggs, which, in turn, is due to rising feed acquisition costs. Currently, information on certain feed components that significantly contribute to the formation of egg production costs is being processed, analyzed, and evaluated by the SRC.

Additionally, it should be noted that the Commission initiated an administrative process by decision No. 38-A on February 20, 2020, to study the economic justification for the price reduction of chicken eggs by eight producing entities. This administrative process is currently suspended, and after the declaration of the end of martial law in Armenia and the adoption of the corresponding decision, the Commission will publish the results of this process.