The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

Food retailers and wholesalers were yesterday said to be hoping to seal a “win, win win” and “peaceful resolution” to their price control dispute with the Government when they meet three senior Cabinet ministers tomorrow morning.

John Bostwick, attorney for the Retail Grocers Association (RGA), told Tribune Business the sector believes that reaching agreement on its expanded 50-strong list of price controlled products will generate “a happy Christmas for the Bahamian public” - a sign that foods traditionally popular during the festive season have been added to the mix.

Voicing optimism that the pharmaceutical sector’s successful price control negotiations with the Davis administration will rub off on the food industry’s separate talks, he added that its revised proposal had been crafted from “a consensus” reached reached among 180 businesses that include wholesale and manufacturer associations and their representatives.

Mr Bostwick said the RGA’s 130 merchant members would view success as achieving a solution they can live with, rather than an initial Davis administration proposal “they could not survive”, adding: “They felt caught between a rock and a hard place, and coming out from behind that rock will be good enough.”

Confirming that food industry representatives are due to meet Chester Cooper, deputy prime minister; Ryan Pinder KC, the attorney general; and Michael Halkitis, minister of economic affairs, at 9.30am tomorrow in hopes of reaching a compromise agreement, he added: “That’s exactly where we are now. We are set to have a meeting on Tuesday morning.

“We have responded to the Government’s last position with a revised list, and a list that has been revised in direct consultation, partnership and a broad consensus with wholesale and manufacturer representatives and their associations. There was quite a lot of thought that went into it from all associations. 

“I think it was very well presented, it sets out both sides - retailers and wholesalers - main items. As far as we are aware, the Government is giving it detailed consideration and we will have further discussions on Tuesday morning.” Tribune Business reported last week that the RGA had submitted an expanded list of proposed price control items to the Government, more than doubling these from the 20 initially offered in its October 26 position paper to now around 50.

The latest list, which the Davis administration is now studying, is also understood to include some entire product categories - such as baby diapers and baby formula - as negotiations intensify to secure a breakthrough that will achieve a compromise acceptable to all. 

“The exercise is very much the same exercise that was done successfully with the Bahamas Pharmaceutical Association, who Is also advised,” Mr Bostwick said of the food price control negotiations. “What the grocers and their wholesalers are seeking to do, as was done by the pharmacists, their retailers and wholesalers sitting together in very much the same situation, is change from [price controlled] categories to an agreed list of items.

“That’s what we’re hoping to achieve when we next meet. We remain thankful to the Government for having entertained a true consultation with the real hope, as stated in our latest communication to them, that the consensus arrived at by 180 business owners, retailers and wholesalers can be shared with the Government to the benefit of a happy Christmas for the Bahamian public, with some thought having been given towards the same.”

The Government and Bahamian pharmaceutical industry achieved their “win-win” agreement by trading off higher, top-of-the-range margins for both wholesalers (20 percent) and retailers (40 percent) in return for expanding the list of price-controlled medications to kidney and cancer drugs. The medicines to be price-controlled were also broken down into individual items, as opposed to entire product categories.

Asked whether his food industry clients are hoping for the same outcome, Mr Bostwick replied: “What the Association would even be happy for is a win for the Government, a win for the public and something that is livable for them and their members.

“That, in a sense, would be a win coming from what they strongly stated would be an untenable situation; something they could not survive. In that sense, you are correct: ‘A win-win-win’. They felt caught between a rock and a hard place, and coming out from that rock would be good enough.”

The Government’s initial proposal capped food wholesale margins, or mark-ups, at 15 percent for all 38 product categories listed, while those for retailers were set at 25 percent across-the-board. The move, which was designed to ease the cost of living crisis currently battering thousands of middle and lower income Bahamians, employed the blunt tool of price controls - albeit on a “temporary” six-month basis - to achieve this. 

The goods impacted, some of which are already price controlled, were baby cereal, food and formula; broths, canned fish; condensed milk; powdered detergent; mustard; soap; soup; fresh milk; sugar; canned spaghetti; canned pigeon peas (cooked); peanut butter; ketchup; cream of wheat; oatmeal and corn flakes.

The remainder were macaroni and cheese mix; pampers; feminine napkins; eggs; bread; chicken; turkey; pork; sandwich meat; oranges; apples; bananas; limes; tomatoes; iceberg lettuce; broccoli; carrots; potatoes; yellow onions; and green bell peppers.

However, the move blindsided Bahamian food merchants and their wholesale suppliers, who had received no advance warning or consultation on the Government’s plans. They warned that the 38 selected categories included more than 5,000 product line items, and would lead to between 40-60 percent of a retailer’s inventory becoming price controlled with mark-ups below their cost of sales.

This would result in a large portion, or the majority, of their inventory being sold at a loss. Besides threatening hundreds of industry jobs, and the very survival of many operators, the RGA and its members also warned that the original proposal could result in food shortages as retailers/wholesalers decline to stock loss-making items while also increasing prices on non-controlled items, thereby further fuelling already soaring inflation.

“We’re really hoping that the spirit of consideration, understanding and partnership shown between the Government and Pharmaceutical Association carries over into these negotiations because these services are equally critical, and there is a quite equal desire to reach an agreement,” Mr Bostwick told Tribune Business.

“We got the document back to them on Friday, and I really do hope they can come to terms. I’m hoping that we can reach a consensus and a peaceful resolution.” He confirmed that there have been no moves by Price Control to enforce the Government’s original price control list, and/or hand out fines to merchants, despite the Davis administration having set November 1 as the deadline for them to come into effect.

Mr Halkitis last week said the Government had agreed to some of what the food distribution industry has been requesting, namely higher mark-ups for Family Island retailers and perishable products that have a shorter shelf-life and go bad much quicker.

While the Association had supported 25 percent on all dry grocery items, it requested that this be increased to 30 percent for Family Island businesses due to the extra shipping, logistics and overall business costs they endure compared to New Providence.

And, due to “the rising costs of electricity and shrinkage (spoilage), the food retailers had called for a 35 percent mark-up in Nassau, and 40 percent in the Family Islands, for perishable goods as opposed to the Government’s originally proposed 25 percent limit.

Mr Halkitis said the Government had agreed to a five percentage point increase in the mark-up for price-controlled perishables, such as meats and vegetables, along with “a slight increase for the Family Islands to cover transportation”.

Debra Symonette, Super Value’s president, told Tribune Business the margin increases on perishables and the Family Islands were “very valuable” for merchants. “We’re particularly concerned about the Family Islands because their overhead costs are a lot more with the shipping,” she explained.

“They have some real issues with their perishables getting there. By the time they get there, they have to throw a lot of their perishables away. Because of their unique factors; their freight, having to ship all of their goods a little further and the time factor plays a part in perishables..... They cannot survive a long, long time and, when they get there, they have to throw a significant amount away. And all of us have to deal with some pilferage and spoilage.

“We have to cover all of our operating expenses, and there are so many of them. Don’t forget that Bahamas Power & Light (BPL) is going up, the minimum wage is going up, so costs are rising and our expenses are going up. We can’t have the margins going down at the same time. That would be counter-productive.”