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With low apple prices in Ukraine, supermarkets earn very little from apple sales

During the audit of the fruit and vegetable departments of supermarkets in five countries of the region, EastFruit experts determined, among other things, the average retail prices in stores in Kyiv, Chisinau, Tbilisi, Dushanbe and Tashkent. Since the project also conducts weekly monitoring of wholesale prices, we had enough information to compare retail markups in different cities.

One of the most interesting surprises was the extremely low average markup for Ukrainian apples in Ukrainian supermarkets. The average markup of 32% for apples in Kyiv was higher than that in the Georgian capital Tbilisi, where it was 24%. However, the margin in absolute terms was only around $0.09 – about 2.4 UAH/kg, which is less than in any other capital of the region where we conducted an audit. At the same time, retail prices for apples in Ukraine were the lowest among all countries in the region. For instance, a poor Tajik consumer paid 3 times more for one kilogram of apples in a supermarket in Dushanbe than a better-off Ukrainian consumer.

Is it good or bad? Let’s figure it out.

Let’s start with the retail price level. Low apple prices are an advantage for consumers, because they allow an increase in apple consumption. This means that growers benefit, as well. We note that we did not take into account the prices for apples that did not meet the minimum quality criteria, otherwise the average price in Kyiv would have been even lower.

Despite an average price of 9.75 UAH/kg ($0.36) for the most affordable Ukrainian apples, there are also the Pink Lady brand apples on the shelves of Kyiv supermarkets at over 150-170 UAH /kg ($5.5-6.3), i.e. 15 and more times more expensive. If you ask producers whether they would like to sell apples 15 times more expensive, the majority of them will not refuse. However, not only improvement of the quality is needed, but also investments in marketing and promotion. So far, no one can legally grow Cripps Pink apple variety sold under the Pink Lady brand in Ukraine. These apples are in good demand, since they are sold in Ukraine even when Ukrainian apples are so cheap.

As for the markups, there is no doubt that the higher the markup, the more profitable it is for the store to sell this product, provided that the turnover remains high. It is obvious that apples are used as a loss-leader this year – a product that attracts a buyer, but on which the chain does not make much money. Nevertheless, the assortment of apples is high, and, besides the cheapest ones, there are those where the supermarket’s markups higher. Many buyers prefer a higher quality product, even at a higher price. However, the presence of very cheap products on the shelves affects the sales of more expensive ones.

Therefore, we believe the main goal of stores of all formats should be the absence of low-quality products. Low-quality apples or other vegetables and fruits spoils the general perception of the store, and not only of the produce department. In addition, apples are already the cheapest fruits. This means that it is doubly unprofitable for the chain to reduce the markup on them.

Supermarkets in Chisinau earn 3 times more than supermarkets in Kyiv, even on the cheapest apple varieties. Tbilisi is the closest in terms of margin, where the chains earn on average about $0.14 per kg of apples, but this is 1.5 times more than in Kiev.

You can learn more about the retail trade of vegetables and fruits, including the volumes of apple sales in supermarkets during the first international Retail Forum on December 2, 2021 in Kyiv. Registration for participation in the event and in the conference “Fruits and Vegetables of Ukraine 2021” is available at this link.

EastFruit

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