Lately, the Hungarian Competition Authority's ("GVH") has been in the forefront in the fight against inflation of food prices. In its efforts, it has developed new price monitoring method and launched sector inquiry into the milk and dairy products market that we have discussed in our previous editions. Now the draft report ("Report") of the sector inquiry is out and open for public consultation until 20 of May.

In its Report, as a response to the sharp increase in consumer prices for milk and dairy products and the weakening supply position of the domestic operators producing dairy products, the GVH makes recommendations.

The GVH found several indicators and market circumstances driving up price elements and thus fuel inflation. The price formula used by the Milk Interprofessional Organisation and Product Board determining the base price forecast for raw milk. Retailer margins and VAT levels for plant-based drinks and soy yoghurts are higher than the dairy products they substitute, which represents a significant additional burden for consumers with lactose intolerance and those who are environmentally conscious. Cost analyses showed that the packaging prices have significantly increased recently. The profitability of the sector decreased significantly, mainly due to the distortive effect of the price cap and significant cost increases.

These recommendations include:

  1. revision of the base price forecast for raw milk;
  2. strengthening the comparability of consumer prices;
  3. revision of the pricing of plant-based drinks to increase consumption;
  4. sustainable (returnable) packaging of products to reduce packaging costs;
  5. operation of online price monitoring system to increase transparency.

The recommendations aim to reduce the costs of producing and processing dairy products, strengthening the competitiveness of domestic dairy producers, helping trimming inflation, and ultimately lessening end customer prices.

Besides its recommendations, the GVH also calls for further regulatory actions and policy changes to improve the position of consumers of plant-based drinks and offers technical assistance for future legislative considerations on food price caps.

The GVH has reiterated its commitment to promoting competition and lowering prices in the retail sector. Additionally, the authority seeks to ensure that the positive impacts of these efforts are spread evenly among consumers. Which – once again – means that similar sector wide investigations and close scrutiny is expected from the authority.

Originally published May 17 2023

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