BREAKING: Hungary Slaps a 10% Cap on Grocery Markups – Retailers Forced to Cut Prices!

Hungary’s New Superweapon Against Inflation: Retailers Face Harsh Price Controls and VAT refund program is introduced for seniors.

Hungary’s Prime Minister Viktor Orbán has announced a radical new measure to curb food inflation: retailers will be forced to cap their profit margins at 10% on 30 essential food items. This game-changing policy, set to take effect in mid-March, aims to put an end to excessive price hikes and ease the burden on consumers.

To support pensioners, the government is also rolling out a VAT refund program for seniors.

Why the Drastic Move?

Hungary’s food inflation hit 7.1% in February, with staple items experiencing shocking price increases. In response, the government gave retailers a chance to propose voluntary price reductions. However, according to Orbán, these offers fell far short of expectations, prompting the administration to step in with regulatory measures.

What’s Changing?

Starting mid-March, supermarkets must ensure that:

• The markup on key food items (such as eggs, dairy, and meat) does not exceed 10%.
• Prices on products with previously excessive markups must be reduced to align with the new margin limits.
• Government agencies will actively monitor and enforce compliance.

Price Gouging in the Spotlight

The Prime Minister cited shocking figures: markup rates on eggs had soared to 40%, while butter and sour cream reached an astonishing 80%. “This is unacceptable,” Orbán declared. Retailers will now be legally required to roll back prices to ensure consumer fairness.

Temporary Measure or Long-Term Reform?

The regulation will initially be in place until the end of May, after which the government will review its impact. However, if inflationary pressures persist, the policy may be extended.

Inflation Data Paints a Grim Picture

Recent statistics reveal a worrying trend in food prices:

• In just one month:
  • Cooking oil surged 5.4%
  • Coffee spiked 5.2%
  • Margarine climbed 4.4%
  • Bread increased 3.3%
• Over the past year:
  • Flour skyrocketed 44.3%
  • Oil prices jumped 27.5%
  • Egg prices soared 24.7%

A Game of High Stakes for Retailers

This margin cap differs from previous price control measures, such as direct price freezes. Under the new model, retailers cannot compensate for lost profits by squeezing suppliers. This means large supermarket chains may face increased pressure to absorb the cuts themselves.

Paradoxically, some industry analysts suggest that retailers might even benefit from higher wholesale prices, as a higher procurement cost means a higher fixed-margin profit in absolute terms. However, overall, lower markups on high-margin products should lead to lower consumer prices.

Elderly Consumers Get a VAT refund

To support pensioners, the government is also rolling out a VAT refund program for seniors. Retirees will receive a monthly VAT rebate of up to 10,000-15,000 HUF (€25-€38) on essential food purchases. This initiative ensures that relief directly benefits consumers rather than inflating retailer profits.

The Council of the Elderly has also initiated negotiations on retirees to be able to enforce this refund as widely as possible. The Council of the Elderly has made several proposals, including the expansion of the food involved, such as mirelite goods, meats, fish, bakery, flour, sugar, cooking oil and eggs.

It is important for the Hungarian Ministry of National Economy and the government to opinion and voice of retirees and organizations representing them. Therefore, what product and when retirees can enforce the tax refund will remain ongoing.

What’s Next?

The impact of this sweeping regulation will first appear in April’s inflation data, though its full effect may take longer to materialize. With global food prices still fluctuating, all eyes will be on Hungary to see whether this bold intervention succeeds in curbing inflation—or if it sparks new challenges for retailers and supply chains.

If you are affected by these changes or have any questions, please feel free to reach out to us for assistance. Our team is here to support you and provide guidance on how to navigate the new regulations.