Greece’s Achilles heel
greek yogurt: Greek yogurt is a dairy classic that consistently boosts national sales. Credit: cyclonebill
Greece’s dairy market and industry has been struggling to deal with major inflation impacting the sector, with an annual year-on-year increase of 23.1% in March (2023) for dairy and eggs, with 25.2% in February, according to the Hellenic Statistical Authority (ELSTAT).
And while overall inflationary pressures are easing, however, with European Union (EU) statistical agency Eurostat noting that Greece’s general annual inflation rate fell from 7.3% in January 2023, to 6.5% in February (2023) and 4.6% in March, ELSTAT says food inflation is roaring ahead still, with an annual rate of 14.8% in February. A March report by the State Budget Office of the Greek Parliament admitted food was Greece’s inflation Achilles’ heel: “The problem is mainly found in food prices which, despite the relative de-escalation of the general inflation index, show a high rate.”
Meanwhile, Greek farmers and dairy producers are still struggle with rising energy, animal feed and packaging costs. The cost of animal feed, which represents 85% of livestock breeders costs, increased by 100% in 2022, compared to 2021, said Panagiotis Peveretos, president of the Hellenic Livestock Association. Greece’s conservative government, facing reelection, had been helping livestock producers and farmers cope by offering animal feed subsidies in January and March 2023. However, Christos Apostolopoulos, president of the Association of the Greek Milk and Dairy Products Industries (SEVGAP), and board member of the Federation of Hellenic Food Industries (SEVT), said the handouts were too small to make a real difference.
Production decline
This has depressed demand as well as production. Based on the latest data from the Hellenic Agricultural Organisation (ELGO-Dimitra), the primary advisor to the ministry of rural development and food, in November 2022, a year-on-year decrease of 4.26% in quantities of cow’s milk and 5.4% in goat’s milk was recorded, even though producer prices had jumped. Giorgos Lechouritis, president of the General Federation of Consumers of Greece (INKA), noted that “cow milk can cost up to €2 per litre today, whilst the price for the same product in 2020 was €0.84 per litre.” The price of Feta cheese, the widely consumed traditional Greek white cheese, has also risen over the past two years: “It started from €7.10 per kg in 2021 and escalated to €12.50 per kilo in 2023,” Lechouritis added.
More specifically, according to Peveretos, Feta cheese export sales bring €630 million per year into the country. “Each year we produce up to 140,000 tones, 90,000 of which are exported abroad. However, the consumption of Feta seems lower, he said, saying the reason was “some Greek businesses sell at higher prices in order to profit.”
It was a similar picture in other segments. According to IRI, a Greek market research company, yogurt sales by value increased by 5.2% in 2022, while sales volumes fell 6%. The overall price of yogurt in 2022 was €4.46 per kg in comparison with €3.99 in 2021. Milk sales rose 5.5% by value in 2022, with sales volumes down 6.4%, while the segment consolidated, with 10% fewer producers by the end of 2022, compared to 2021, said ELGO-Dimitra.
Looking ahead, after these two years of dairy price increases, some companies have started to drop the price of selected products. For example, Serres, northern Greece-based Kri Kri, one of the biggest companies in the sector, reduced its wholesale prices by 10% for fresh cow milk and traditional goat yogurt in mid-April. Commercial manager Giannis Kartsanis told DII a “de-escalation of the prices of raw materials is looming…and Kri Kri wants to return to consumers some of the mark-ups [charged] in the past.” Also, yogurt producer Olympus dropped its retail yogurt prices in March and April, with some Greek media reports citing cuts of 5% to 13%.
Companies have been under pressure from INKA, which launched a consumer boycott of purchases of milk, cheese and yogurt in February, in protest of what it claimed were excessive price rises.
If prices continue to grow, INKA will launch a boycott again, warned Lechouritis: “Europe has started to drop prices in the food sector. However, Greece’s economy will not follow Europe’s steps that easily, due to profiteering and lack of control mechanisms in the market,” he argued.
To tackle alleged profiteering in the food and energy sectors, the government of Greece, led by the centre-right New Democracy Party, approved a ‘reduction of unfair profiteering phenomena’ regulation during the first Covid-19 lockdown in 2020, and capped the gross profit margin of companies until June 2023 at levels earned during September 2021, with sanctions and fines of up to €1 million for companies that do not obey the law.
Also, last November (2022), the government worked with supermarket chains to hold down prices on 51 essential items under a so-called “household basket” scheme, which covered fresh and evaporated milk, feta and other cheese products, cream, powdered milk and yogurt.
Food producers have had concerns about the scheme, with the SEVT’s Apostolopoulos worried that it covered private label products and branded lines. This, he said, “creates the impression that all products are the same. We need to bring added value to our products.” Indeed, inflation has increased the popularity of private labels – often deemed cheaper than branded lines, with IRI noting in March (2023) that 17.7% of Greece supermarkets’ profits in January came from purchases of private label products. Alice O’Donovan, legal and policy adviser for European dairy trade association, Eucolait, agreed that this trend was happening, by noting: “Consumers are still buying dairy products, however there is a move towards cheaper brands and private labels and away from some premium products.”
Another initiative designed to help the industry and consumers is a plan released by the ministry of tourism to promote agro-tourism by opening dairy factories in Greece to tourists. According to the ministry, more than €17 million from the EU Recovery and Resilience Fund for Greece, will be spent on the promotion of agritourism and culinary tourism in Greece between 2022 and 2025.
Moreover, looking across food production, Greece’s EU Common Agricultural Policy (CAP 2023-27) strategic plan, worth €13.4 billion was approved by the European Commission in November 2022.
Other EU-inspired legislative developments impacting the Greece dairy sector are also on their way. According to O’Donovan from Eucolait, “date-marking legislation is expected in the coming months and further down the line we also expect to see proposals on mandatory country of origin labelling for dairy ingredients, animal welfare labelling and possibly sustainability labelling.” Moreover, the EU’s flagship Farm to Fork Strategy is driving the change towards increased sustainability in the agri-food sector, albeit with tougher environmental and health rules. Given that these policies may impose costs on the food industry, including more labelling and packaging demands, Apostolopoulos is uneasy about this flood or reforms. He said this is “bad timing for Greece, despite the fact that sustainability is a one-way path.” At present, he stressed, the Greek economy is still struggling with inflation, making it even harder for dairy producers to adopt sustainable solutions which are expensive.
