The new regulations on food in retail chains are insane

Yesterday it became clear that the Ministry of Agriculture and Food is considering a new regulation that will force stores in the country to sell only local (Bulgarian-made) products on at least 50% of their area. In addition, all stores will be obliged to buy these goods only from producers located in their area or within a maximum of 200 kilometers. In idea, this new regulation will cover all types of essential goods such as fruits, vegetables, meat products, etc. I will put it bluntly – the idea as a whole is insane.

First of all, it is very important which goods this regulation will specifically concern. Alas, I have not yet come across a detailed list in the media. And it does not seem that there is a bill uploaded to the parliament's website. Therefore, I assume that at a minimum it concerns essential food products. Undoubtedly, the most absurd part of this idea is the requirement that Bulgarian goods in stores be purchased within a radius of a maximum of 200 kilometers. First of all, this shows that those who drafted it have no idea about logistics. As the retail chains themselves explained in their statement, such a requirement would completely confuse their current logistics. The practice is that the goods that retailers buy in bulk are first delivered to a large common logistics center, from where they are then distributed and sent to all retail outlets in the country.

This centralized approach allows retail chains to save time and transportation costs. Obviously, when you have one (or even two or three) large logistics center, it is not physically possible for it to be located within a 200-kilometer radius of all the manufacturers from which you purchase goods. But the bigger problem with the proposed regulation is that it requires chains to purchase not within a 200-kilometer radius of the logistics center, but within a 200-kilometer radius of the specific store itself.

This means that shops in Sofia will not be able to supply goods from producers in the following districts: Sliven, part of Stara Zagora, Burgas, Vidin, part of Veliko Tarnovo, Dobrich, Smolyan, Haskovo, Varna, Silistra, Ruse, Targovishte, Shumen, part of Gabrovo. These are HALF of the districts in the country! In practice, this means that, for example, bread in Sofia will certainly become much more expensive. Bread producers are concentrated on the other side of the country from Sofia – in Northeastern Bulgaria.

Any brands of bread produced there, including those of some of the largest bread producers such as "Savi Mex" and "Dobrudzhanski Hlyab" AD, will not be able to sell in Sofia, which is the largest city and the richest market in the country. What's worse is that they will not be able to sell to stores in the second largest city in the country, Plovdiv, which is also more than 200 km. from Varna and Dobrudzha, where the production of these companies is concentrated. These companies also produce other products such as spaghetti and macaroni and flour. These, by the way, are all products that have been among the most sought-after in supermarkets since the quarantine began. But this is just the tip of the iceberg.

Let's take another example - the company "Gradus" AD, which is the largest poultry company in the country. It produces all kinds of chicken products and is the largest meat producer in the country. Do you know where the company is headquartered? Stara Zagora. Thank God, this city is 192 km. from Sofia, so at least we will get rid of it here. Too bad for the people of Varna, however, because their city is 206 km. from Stara Zagora, so no chicken for them. Not to mention Dobrich and Silistra. In Southwestern Bulgaria, Blagoevgrad is also over 200 km away.

What about the sausage manufacturer KFM with a meat processing plant in Blagoevgrad? Directly write off all of Bulgaria east of Stara Zagora and northeast of Gabrovo (including them) – no KFM sausages for this part of the country. I am not trying to advertise one brand or another, I am simply using well-known brands as an example. In short, this regulation will lead to a shortage of one type or another of Bulgarian-made goods in every corner of the country. There will be no Bulgarian bread in Sofia, there will be no Bulgarian sausages and chicken in Varna, there will be no Bulgarian bread and chicken in Blagoevgrad.

And when this shortage of goods occurs, what do you think will happen? First, the price will rise, of course, and consumers will suffer from this. But Bulgarian producers themselves will also suffer, because the scale of the local market will shrink for them! What do you think will happen to the income of bread producers in Northeastern Bulgaria when stores in Sofia and Plovdiv are banned from buying their products? They will collapse! At a time when the economy is in crisis anyway and demand is shrinking both on the local and international markets! The proposed bill is a typical example of a measure that will harm precisely those it is supposed to help.

Not to mention the effect on the stores themselves, whose costs will soar not only because they are forced to buy more expensive goods, but also because of all the logistical complications that the proposed regulation would create for them. Are you beginning to realize what a piece of stupidity those who proposed this idea have concocted? I am not trying to be polite at all. It is unacceptable that such outrageously illiterate ideas, which would lead to the mass impoverishment of millions across the country, as well as unemployment and bankruptcies among the affected manufacturers, are being seriously circulated by the people who claim to govern us.

The requirement that stores can only sell Bulgarian goods to producers is certainly the craziest part of the proposed bill, but it is far from the only problem. The very idea of introducing any restrictions on the type of goods (according to their origin) in a time of economic crisis is very dangerous. It is precisely at these moments that it is of utmost importance that the retail market is as flexible as possible, so as not to lead to a very sharp increase in the prices of basic necessities (such as food) precisely when the incomes of the population are stagnating and for many even falling, and unemployment is growing.

Moreover, we at EKIP have written before about the pointlessness of regulations that aim to make Bulgarians buy more or even only Bulgarian products. For starters, this even contradicts the treaties of the European Union. But even more importantly, it contradicts simple economic logic, as we have already written in this article. First, this will lead to a serious increase in the price of this type of goods, which are not produced much in Bulgaria, and secondly – is there a need for such regulation at all? Many and various types of goods from Bulgarian companies (such as those I mentioned above) are sold en masse in supermarkets anyway.

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