Georgia parliamentary commission flags import dependence, retail dominance as key pricing pressures

A temporary commission of the Parliament of Georgia examining the pricing structure of food products, medicines and fuel has identified heavy reliance on imported raw materials and the dominant position of supermarket chains as major challenges for domestic food producers.

Speaking after the commission’s first session on Friday, chair Shota Berekashvili said discussions with local producers of dairy, meat and eggs revealed several structural factors affecting costs and potentially influencing consumer prices.

According to the commission’s findings, approximately 90% of raw materials used by producers in these sectors are imported. This level of dependency exposes companies to external inflationary pressures and exchange rate risks, which may be reflected in final retail prices.

Producers also pointed to high operational costs, particularly expenses associated with accessing major supermarket chains. These include various listing and service fees, which increase the cost of product distribution.

Another issue raised concerns the imbalance in bargaining power within the supply chain. Supermarket chains, positioned at the top of the retail structure, were described as having stronger negotiating leverage in contractual relationships, often setting terms that place producers at a disadvantage.

Cash flow constraints were also highlighted. Delayed payments from retail partners reportedly compel companies to seek additional credit financing, increasing their financial burden and overall production costs.

In the meat and processed meat sector, inventory management was identified as a further challenge, with reported losses reaching 5-6%. Given that average profit margins are estimated at around 5%, such losses can significantly impact overall profitability.

Finally, producers cited the high cost of credit as a persistent obstacle to sustainable operations.