The mandatory action is in fact a communication action

Galgóczi Eszter – Vető Balázs

The government has decided that the price freeze on basic foodstuffs will remain in place, in fact that large food chains will be obliged to announce weekly promotions.  Will this measure stop inflation or will it have the opposite effect? Will the shops deal with the losses or will retailers pass the costs on to consumers? While asking such questions, we are turning the issue into an economic discourse, dismissing the fact that this is in fact a political communication tactic. 

According to the regulation from June, shops will be obliged to offer one product from each of twenty food categories defined by the government every week at 10% less than the best price of the previous 30 days. Will this bring a change at large store chanis?  Hardly. Browsing through the special offers magazines – which, at these food prices, is probably something that more and more people do every week- it is easy to see that we are already being offered more than 20 products at prices lower than those offered by competitors. These include bakery products, vegetables, fruit, dairy and meat products, and many more.

Competition is natural in food retailing: stores compete for customers, luring us into stores with different products on sale, so that we can buy non-special offers from the same stores. It’s marketing at its best, but if you shop around carefully and take the time and effort to visit several shops, you can end up doing really well. 

Mandatory public action can do little to change this situation. Of course, one can speculate on a theoretical level that the current 25 per cent promotions in shops could result in a smaller saving on the higher price of the previous day’s products than a 10 per cent promotion on the lowest price of the previous 30 days, but if the distrust is there in the first situation, there can be no doubt that this can certainly be passed on to consumers.Anyway, the point of promotions in this inflationary environment is not to get the product at a lower price than last week or even the day before, but to get it cheaper than you could at other stores and save money.

That being said, we have to say that we cannot expect a real, top-down price reduction, our lives will not change much in this respect, and so we have to ask ourselves: what is the real purpose of this measure?

It has become almost an anecdote that voters, as soon as they see food prices, blame the government for the fact that their consumer basket is getting smaller by the week, and that ultimately, according to the economic referendum theory, we are facing a change of government in 2026 at the latest, and idealists say that the cabinet will fall sooner due to failed economic measures. However, unless the government is clearly to blame, or there is no real alternative to the incumbent, the correlation between economic stagnation and voter disenchantment is reduced to a very small one. The government has recognised this situation from the very first moment and has tried to set up an alternative reality with a grain of truth, shifting the responsibility for the effects of its own decisions to the European Union’s sanctions policy, to the war, to present the image that other countries are suffering more from the crisis, while Hungary, although struggling, is resisting to the extent of its possibilities.

Communication works, we accept 40% food price inflation because we have no other choice. Moreover, we all fall into the trap of such simple messages. The point of simple messages is that we cannot counter the complexities of reality and the facts with obsessive beliefs and one-sentence messages repeated ad nauseam.

But if that’s not enough, and you still feel that when you get to the shops you’re in doubt about whether everything should cost that much, there’s an answer to that too. Just think of an everyday shop: we are attracted by red, green and orange promotions, and the more stickers we see that catch our eye, the more we buy what we think is cheap without thinking.

From one moment to the next, these already existing surfaces will become political marketing surfaces, mini-posters that will no longer advertise the merciful actions of the shops, but the government’s victory over inflation.

So the point of the compulsory action is not real economic intervention, but to give the impression of a communicative victory in the battle against prices, and all this without costing the government a penny, the tool being provided by the shops, and possibly without costing them a single forint extra.

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