The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

The Bahamian food retail industry was yesterday asked to ‘make the case’ for an increase in its price control margins, a senior industry executive conceding that the restrictions were “not going to go away”.

Clifton Fernander, Super Value’s senior buyer, told Tribune Business that the issue for the industry was whether it would get an increase to its permitted gross margins, and by how much.

Speaking after the Retail Grocers Association again met with Shane Gibson, minister of labour and national insurance, Mr Fernander said the sector wanted an increase from its current 18.67 per cent gross margin to “at least 25 per cent”.

“Really, we just outlined our position about the cost of doing business, electricity going up, licence fees going up, shipping fees going up, expenses having gone up all around, and were just asking the Minister if we can get more than 18 per cent on price controlled items,” Mr Fernander told Tribune Business.

“It has been this way ever since price controlled items came into effect. We think now is the time to look at it.”

He added that typically, up to 70-80 per cent of a Bahamian food store’s inventory consisted of price-controlled items or ‘breadbasket items’, where retail gross margins and mark-ups were restricted by law.

Staple products, such as eggs, cheese, flour, grits, rice and tuna, are sold effectively as ‘loss leaders’, with food stores relying on a small percentage of their inventory to drive profits.

“This is important,” Mr Fernander said of the Association’s push. “Christ, we’re selling some of the basic items and necessities at a loss.

“Some of the items we’re selling at a negative 10 per cent, such as eggs. Costs are going up and up, and we’re just asking the Government for some relief.

“Price control is not going away, mind you. It’s a matter of whether they will increase the percentage, and by how much.”

Philip Beneby, the Retail Grocers Association’s president, in a February 2014 letter to the Coalition for Responsible Taxation, had warned: “While increased costs are always difficult to absorb in a truly free market, the restrictions imposed by the Price Control Act on retail grocers have meant that our businesses are slowly being strangled.

“The Price Control Act forces retail grocery stores to subsidise food items by limiting the allowable gross margin to 18.67 per cent (prior to losses, shrink and pilferage) on a large percentage of our sales.

“This maximum margin was set in 1971 and has not being updated since. Many of our members operate cost structures in excess of 25 per cent and are incurring losses on these bread basket items.”

Mr Gibson yesterday asked the food industry to produce data on how much its various input costs had increased “from A to Z” over the years, indicating that his Ministry and the Government would examine the issue once this was received.

Describing the meeting as positive, Mr Fernander contrasted the gross margins permitted the food retail industry with those given to the auto sector on parts and accessories.

And he pointed out that the Government’s plans for Value-Added Tax (VAT) exclusive labelling on shelf prices would only let Bahamian consumers know how much its policies affected the prices they were paying.