The Chamber’s Policy Unit refers to reports published in the media in relation to the increase in food prices. The Chamber is directly engaged in discussions about food prices through various fora including the Retail Price Index (RPI) Board. We are interested because inflation hits businesses’ operations and their competitiveness.
There are many interpretations to these increases, but when one analyses the figures in greater detail, we noticed that there were a number of one-off rises which had a disproportionate impact on the index over the last year. These included, the price increases of dairy products and bread which also carry a heavy weight on the total index. Furthermore, increases in vegetable prices could be linked to seasonality and inclement weather conditions during this winter which had a negative effect on this year’s yield therefore effecting the supply of local produce and increasing the demand on imported produce.
Nevertheless, the Chamber disagrees with what was reported in the media and a senior economist’s assessment that Malta’s market is uncompetitive in terms of the number of operators on the market. The analysis of imported inflation in the report continues to fail to acknowledge the reality that prices in Malta cannot follow those in the EU in a linear fashion. This is due to reasons which are specific to Malta and not due to market imperfections.
Since Malta joined the EU in 2004, a number of parallel traders have emerged on the market. Further to this the retail segment has also seen a shift with many supermarkets moving in the importation and distribution segment. The Chamber therefore feels, that there is a healthy competitive environment in place.
In Malta’s case, as rightly pointed out in the media report, our small size and insularity, which is not directly linked to mainland Europe comes with its own specific challenges. This translates into added transportation costs and limitations in making the best use of economies of scale purchasing due to the market’s size.
Being a net importer in terms of food stuffs, Malta is also directly dependent on what happens on the international markets. If demand rises for certain items, the country is impacted negatively as international prices tend to increase.
Maltese consumers are generally frequent travellers and have observed that there is generally wider choice in local supermarkets than abroad. In terms of confectionery items, for instance, an outlet in Italy or the UK would offer a vast predominance of local products with a few import competing brands. In Malta, on the other hand, the consumer is spoilt with a much vaster choice as supermarkets carry locally manufactured goods besides others imported from the European single market and other non-EU markets. Consequently, local supermarkets carry in excess of twenty thousand "stock keeping units (SKUs)" compared to a figure hovering around the ten thousand mark in the rest of Europe.