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The Zimbabwe dollar has gained almost 35 percent in value since its nadir at the end of the third week of June, almost five weeks ago, and by now a lot of prices should have fallen dramatically considering that the excuse for the rapid price rises of May and most of June was the falling value of the local currency.
The price of the odd brand of the odd product has fallen fast and hard, sometimes by close to that 35 percent, showing that there are manufacturers and their retailers who use proper costing models and will feed fluctuations in the exchange rate into their final prices with high levels of precision.
But there are some who do not and seem to want to retain far higher prices than pure value calculations might suggest. In some cases, we do have older stock bought when the US dollar was considerably more expensive, and this would cover both raw materials in industry and the final products in the retail sector. But that excuse is wearing thin and will be wearing even thinner as time goes on.
At the end of last week, one major city centre supermarket was selling five brands of roller meal, a fast moving product that is often milled only a few days before it is put onto a supermarket shelf.
The price for a 10kg bag ranged from just over $27 000 to just over $39 000, a variation of more than 40 percent. Yet all roller meal in Zimbabwe is produced from the same stock of grain, what our farmers grow and what the Grain Marketing Board sells, and all millers use the same milling process on almost identical equipment.
There are no significant differences in taste or texture between brands as a result. This huge variation in price tends to support the contention of the more reputable retailers that they are not responsible for the price rises. Rather they buy product from the manufacturers or importers, put on their mark-up, usually a pure percentage, and sell it.
So when a delivery comes at a higher price the final retail price will be higher. There is the extra refinement during periods of currency volatility when the replacement cost of a product will be used, the retailer needing to buy new stock at the new price. But right now use of that model should see prices falling again if manufacturers were continually revising their prices down.
If the retailer was the one setting the final price, instead of just adding a modest percentage mark-up, and in the case of mealie meal most retailer margins are modest, it is highly unlikely that there would be such huge gaps between the prices of each brand. So the retail price is directly dependent on what the retailer paid for the product, or if they were granted credit what they unconditionally promised to pay.
As will mealie meal, the price of cooking oil has been falling, again with a fast moving product where bottles do not stay on shelves forever.
But the degree of fall varies. Again the retail price varies between brands, although not as dramatically as with mealie meal, and there are additional factors such as the percentages of soya oil, cotton seed oil and sunflower oil in the final blend or product. And there are multiple sources of raw materials, unlike the case of maize.
In one more ugly case there were two brands of milk powder on sale in that shop, with the cheaper brand almost half the price of the other. And the price of the products of the other, when compared to the same products sold in US dollar tuckshops, suggests that the manufacturer was using an exchange rate of something close to $10 000:US1 when taking the supermarket’s cash or commitment on delivery. At the moment shoppers are buying the other product or going to the tuckshops if they have US dollars.
Besides sticky retail prices in local currency, and the Consumer Protection Commission has noticed this, we are also seeing some retail prices in US dollars rising so that the final Zimbabwe dollar price remains more or less constant.
One suburban supermarket quotes all prices in US dollars although it accepts all currencies including the Zimbabwe dollar at the tills and uses all platforms for payment. The daily supermarket exchange rate, that is the interbank rate plus 10 percent, is prominently displayed behind the tills. The business operates fully within the law.
But some products have risen in price in US dollars by almost 8 percent, knocking out a week’s fall in the price of a US dollar. These tend to come from the same group of companies, and considering that most other US dollar prices are constant, with local currency prices falling as a result, it is once again likely that the supplier is the one pushing up the US dollar price.
The retailer would be more likely to have increases across the board if they were initiating the process.
But products from another manufacturer have jumped far higher, by around 30 percent, in US dollar terms wiping out almost all the gains in the value of the local currency since the price of a US dollar started falling. Fortunately, this supplier has a very limited product range, but tends to dominate the one market where it does have a presence.
While the Consumer Protection Commission will be making weekly checks on prices, and following up where it appears that something untoward or just plain weird is happening, consumers can take action themselves.
It is becoming ever more obvious that consumers need to shop around, both for brand within a particular retailer and between retailers. The savings can be very high.
In normal trade there are price differences between brands, even when the actual product is identical, and brand-value can create modest premiums, but only modest. Anyone expecting brand loyalty these days is daft.
Retailers have stocks that were ordered or arrived on different days, and consequently the acquisition prices can vary a lot and this will reflect in the final retail price. Checking out prices before doing the week’s shopping now appears essential.
There is a bit of running around involved, but if you can reduce the price of a trolley-load of goods by 20 percent or more, by splitting it between three smaller trolley loads, then an extra hour for shopping seems worthwhile.
This will also apply pressures on manufacturers trying to maintain their final price in Zimbabwe dollars, and on retailers tempted to do the same, although the retail business is far more competitive than Zimbabwe manufacturing.
It should also create pressure on manufacturers to start issuing credit notes, so retailers can lower final prices.
The credit notes would revalue the product on the shelf to the replacement cost, refunding the rest to the retailer so they could sell more and so re-order.
Online Reporter