Saturday, March 6, 2010


While rest of the world was reeling under the inflationary pressure on food prices, Germany seems to be facing a slash down of food prices due to reasons not related to supply-demand factors. In a bid to attract more customers during the recent economic melt down, major retailers are reported to have engaged in a price war, benefiting the consumer to no end. But the government is worried about such a situation as reflected by the anguish expressed by the agriculture minister of that country.

"Even as the world's largest fair for food, agriculture and horticulture was set to open, more fuel was being poured onto the already heated debate over food prices and quality.This week, a number of food discounters in Germany - led by market leader Aldi - continued an ongoing
price war with yet another round of cuts, this time on items ranging from vegetable oil to breakfast cereal to snack chips. There were 12 such major price reductions over the course of 2009. Speaking at the fair, German Agriculture Minister Ilse Aigner said she was "very concerned" about what she saw as "acrimonious competition" as the discounters vied for market share".

Probably the government was worried that the prices at which foods were offered cannot be sustainable and might result in heavy operational losses for the players involved, even leading to eventual bankruptcy with unpredictable consequences to its economy. What is not understood is how any competition can be snuffed out in a democracy and if the warring retailers get together to fix reasonable prices for those products commonly offered by them, it could be construed as an unfair trade practice. What government has to ensure is that such price wars do not result in compromise on food quality and safety.


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