Why manufacturers agreed to reduce the cost of food for cats and dogs
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The largest producers of animal feed will reduce prices by 30%. The companies Mars and Nestlé Russia, which the Federal Antimonopoly Service has recognized as collectively dominant in the cat and dog food market, will take such a measure. According to the FAS, in 2023 their market share was more than 70% of total sales. The price analysis was carried out in connection with citizens’ complaints.
As stated in the FAS release, in response, manufacturers agreed to voluntarily reduce the cost; the companies will provide partner retail chains with “promotional discounts of up to 30% on a certain range of food for cats and dogs.” Previously, the service had not agreed on such conditions with large product manufacturers, says Andrey Karpov, Chairman of the Board of the Association of Retail Market Experts:
“The FAS approved purchases if they kept prices for socially important goods with a markup of within 10%. X5 and Magnit, for example, had this kind of purchase. Collective dominance was last recognized by large marketplaces, so far this has not had any consequences, but this may be the next step that awaits market participants. Indeed, Mars and Nestlé are leaders in the animal feed market, and therefore the recent price changes that have taken place have excited the antimonopoly service, so it has made a corresponding decision.
It’s difficult for me to say who these people are who are complaining, because formally such people can be found in any category. Could distributors themselves raise prices, bypassing the manufacturer? Doubtful because these are direct deliveries. As a rule, large companies regulate prices on the shelf to some extent. Even if this is not entirely legal, manufacturers are interested in having a price on the shelf that is clear to them, and, accordingly, they agree on this and the same prices are set for these products in the chains.”
The Mars company told Kommersant that they have not raised prices for animal products for 1.5 years, despite the rise in prices for raw materials, packaging and logistics. But Nestlé warned in January about rising feed prices. Then the corporation referred to an increase in production costs due to the rise in price of raw materials by more than 1000%. Moreover, prices increased not only for ingredients, but also for logistics – by 30%, as well as for flexible packaging – by 8%. Nevertheless, reducing the cost of products by one third at once is unprecedented, notes Sergei Ermolenko, partner at the law firm Orlova\Ermolenko:
“This is a very serious decline. Usually, when it comes to monopolistic price increases, this applies to large companies and a significant part of the market. Even a relatively small price increase within 10% is already considered sensitive for the market and provokes complaints to the regulator. In this case, we are talking about some kind of promotional discounts, but it is not very clear what this will mean. Are they limited in time? Does this apply to the entire assortment or just some product lines, or even just individual products? The figure of 30% looks unprecedented, on the one hand, but, on the other hand, in monetary terms for companies, the decrease in revenue will not be so noticeable on a general scale if it does not affect all positions.”
Last year in Russia the share of imported pet food was less than 10%. For comparison, in 2021 the figure was at the level of 15-20%, the National Association of the Pet Industry reported to Kommersant.
The organization explains the reduction in the volume of imported products in this segment by restrictions on the import of feed of certain brands that were introduced by Rosselkhoznadzor. In addition, the dynamics are affected by difficulties with procurement of some foreign brands.
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