Capital controls hurt supermarkets in 2015

11 March 2016
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The introduction of capital controls, political unrest and the turmoil in the banking system have had a major impact on the supermarket sector. Following the July 5 referendum, sales in food retail have remained in negative territory, as last year’s turnover losses came to 2.1 percent compared with 2014 despite a rising start to the year.

The ongoing restructuring in the sector is also attributed to the impact of the economic crisis of 2015: The problems certain chains had been facing before June 2015 were aggravated by the capital controls, as a number of companies stopped supplying goods and sales declined. As things stand, with consumer confidence at a low point, sales are expected to shrink by a further 3.9 percent this year.

IRI research data for 2015 showed that the decline in turnover was also affected by the value-added tax increase from 13 to 23 percent on a multitude of food commodities, and by the three national polls – two early elections and a referendum – last year. The VAT hike is projected to have provoked a 0.4 percent decline in sales volume last year, while in 2014 there had been a 0.6 percent increase.

Last year had started with optimism as supermarket sales had posted yearly growth in the first few months thanks to the expectations that the new government had then generated among consumers.

The turning point was the capital controls, as in June sales posted the biggest annual increase in a month (up 5.5 percent) owing to the supermarket run following the announcement of the referendum. In the week from June 28 to July 5, sales expanded by a spectacular 39.1 percent on a yearly basis, but then sales plunged 8.3 percent in July, as households had stocked up on goods.

The strongly declining course continued up to the end of the year, with December recording a historic low after its 7.5 percent decline from December 2014, the IRI data show.

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