The introduction of the Supply Chain Law has sparked debate over its potential impact on prices and producers in Bulgaria. The Ministry of Agriculture maintains that the law will benefit both consumers and agricultural producers, who have long complained that their products are purchased at low prices while retailers allegedly reap high profits.
Nikolay Valkanov, executive director of the Association for Modern Trade, challenged this perception on Nova TV. His association represents major retail chains including Billa Bulgaria, DM Bulgaria, Kaufland Bulgaria, and Lidl Bulgaria. Valkanov emphasized that retailers typically operate on very low margins, ranging from 2 to 5 percent. By contrast, profit margins in processing are around 6-10 percent, while agricultural producers can see 25-30 percent.
Valkanov warned that attempting to regulate or legally fix profits for producers could backfire. “If the law dictates what profit or expenses must be, it won’t benefit anyone. It could make agricultural producers even less competitive. Currently, many Bulgarian producers face challenges with productivity, investment, and other structural issues. Compared to other European countries, the gross added value per unit of land in Bulgaria is among the lowest,” he explained.
He also noted that margins for fruits and vegetables can sometimes drop to zero, meaning products are sold at a loss. Even when a markup appears high, such as 80 percent, this often reflects costs associated with turnover, transportation, and refrigerated storage. “There are countless factors that influence pricing,” Valkanov said.
Competition in retail is high, and the market naturally limits price increases. Large chains account for no more than half of the market, and pricing strategies must respond to local conditions. Regarding the planned “People Shops” initiative, Valkanov suggested observing its operation first, noting that each product has unique costs and turnover dynamics.
On the issue of controlled wholesale margins of 10-20 percent, he warned that such limits could ultimately raise prices for other goods and create shortages, citing similar experiences in Hungary. If retailers cannot cover costs under regulated margins, they may reduce stock of controlled products.
Valkanov addressed the requirement for 80 percent of milk and dairy products to come from Bulgarian producers, noting that when including yellow cheese and butter, local raw materials currently supply around 60 percent of the retail network. He also highlighted that dairy sales extend beyond retail into hotels, restaurants, and catering, complicating the ability to fully meet the requirement.
Regarding why some goods in Bulgaria are more expensive than in Spain, Valkanov explained that market size, turnover, logistics, and company commercial policies all play a role. Smaller markets, lower volumes, and transportation costs can drive higher retail prices. For example, imported oils sold in small quantities in Bulgaria may carry higher markups due to low sales volumes and transport logistics.
Finally, Valkanov cited an analysis by the Consumer Protection Commission (CPC) showing that in 2022-2023, delivery prices for dairy products rose between 20 and 70 percent, and pork prices increased between 20 and 120 percent. He emphasized that these price changes were primarily driven by suppliers, not retailer markups, reflecting broader market conditions rather than excessive profits.