Local manufacturers and distribution companies, unfortunately, cannot dictate conditions on the market. Neither distributors nor local producers possess significant market power; they are buyers. The process must be managed in a way that does not harm any party and ultimately protects consumers, said Lasha Rizhamadze, Head of the Georgian Distributors Business Association, speaking to journalists after a meeting with the Prime Minister.

According to him, beyond transportation costs up to customs clearance, there are additional substantial expenses that significantly affect prices.

He also explained that regulation will not solve the problem entirely, though it can play a positive role.

“The association and sector representatives once again provided information on problematic issues, especially those related to relations with retail chain stores. Questions were raised based on the retail sector’s positions that had accumulated during the previous meeting of the government commission with retail representatives. We presented our information and the sector’s views on these matters. Unfortunately, local manufacturers and distribution companies cannot dictate terms on the market. Neither distributors nor local producers have significant power; they are buyers. We also discussed international practice. In all developed countries, such legislation and regulation exist in similar types of relations. However, we reiterate that this will not fundamentally resolve issues that may further affect prices. Nevertheless, it will certainly play a positive role. This process must, in any case, be conducted in a way that does not harm any party and ultimately protects consumers.

According to international practice, the framework includes measures such as setting an upper limit on so-called cashback, fees for opening new stores, shelf placement fees, and so on. Certain types of regulation in this area would allow both manufacturers and distributors to proportionally determine limits or prohibit such practices altogether, which would have a positive impact on prices.

Unfortunately, we are not producers ourselves - Europe is a producer. European markets are significantly larger, and the same price cannot be offered by a manufacturer to a country of 3 million people and one of 60–70 million. Naturally, the price difference will be substantial. As for changes at that level, they are physically and technically impossible, because beyond transportation to customs, there are many additional costs that have a major impact. We are saying that regulation concerns not prices, but relationships, and sets specific limits and frameworks within which local manufacturers and distribution companies can reduce prices. These are the costs paid to ensure their products are placed on retail shelves,” Rizhamadze said.

For reference, representatives of distribution companies attended today’s meeting of the government coordinating commission working on food prices.