Profit Margin Cap Takes Effect: Shops Sell Groceries at Lower Prices From Today

Starting today, the profit margin cap is in effect in stores: for thirty staple food products, the retailer's profit margin cannot exceed ten percent. With this measure, the government aims to put an end to excessive and unjustified price increases.

Illustration (Photo: Zoltan Havran)

From today, consumers will noticeably pay less for any of the food items covered by the profit margin cap, with the government's latest measure having come into force. The margin cap aims to curb excessive and unjustified price hikes: consumer price trends in February justified the government's immediate intervention.

Prime Minister Viktor Orban announced on March 11—barely a week ago—that the government had decided to limit retailer margins to a maximum of ten percent for thirty staple food products starting in mid-March.

In recent months, the margin on eggs reached forty percent, while for butter and sour cream, it exceeded eighty percent—PM Orban highlighted, adding that such levels were unacceptable.

For all food items where margins have soared, prices must now be reduced so that the consumer price does not exceed the purchase price by more than ten percent. The government will monitor compliance with this regulation.

In a radio interview last Friday, the prime minister made it clear: if the profit margin cap fails to yield results, the government will introduce tougher measures. This could mean a price cap, which would impose government-regulated price limits. However, this approach has drawbacks, as retailers could shift their losses onto producers, which is not possible under the retail margin cap regulation. Viktor Orban stated that the government has a response to this as well: if the profit margin cap is extended to all food products, such a maneuver becomes impossible.

These are the affected food items

The thirty essential food products subject to the ten percent profit margin cap include various poultry and pork products, dairy products, oil, flour, margarine, sugar, and eggs. The full list can be found here.

The most noticeable price reductions will likely be in dairy products and meat, as retailers had the highest profit margins on these categories. In January, the average margin on pork chop was nearly 55 percent, while for chicken wings, it was over 42 percent. Data from January also show that stores were selling sour cream for more than twice its purchase price, and the same was true for butter and fruit yogurts.

 

The ministry provide assistance

The national economy ministry is providing guidance to retailers to help them comply with the regulations. Through its professional oversight body, the National Trade and Consumer Protection Authority, the ministry is offering all necessary support to ensure that retail stores clearly understand their obligations. To facilitate compliance, the ministry is publishing a professional guide to assist all affected parties, including businesses and government offices responsible for enforcement.

It is important to note that the ministry took small retailers into account when drafting the legislation. As a result, the regulation only applies to retailers with a net sales revenue exceeding one billion forints in 2023.

The ministry expects that the measure will lead to an average price drop of more than ten percent across the affected thirty product categories.

National Economy Minister Marton Nagy stated in a background discussion that the price-lowering effects of the measure will already be reflected in the April consumer price statistics. The Central Statistical Office’s May data release will provide a clearer picture of the results. Initially, the measure will remain in force until the end of May, after which the government will review its impact and decide on any necessary further steps.