Commission investigating food, medicine, and fuel pricing publishes its findings

A temporary parliamentary commission established to examine the pricing structures of food products, medicines, and fuel has published its findings, concluding that effective policy should be directed not towards the administrative control of prices, but towards the structural improvement of markets, greater transparency, and enhanced efficiency across supply chains.

According to the document, the retail market is characterised by competitive dynamics and low levels of concentration. Profitability indicators within the sector align with international benchmarks, with no evidence of excessive margins.

“Georgia’s fast-moving consumer goods (FMCG) sector is one of the most significant and socially sensitive segments of the economy, with a direct bearing on both living standards and inflationary trends. Against this backdrop, the study aims to analyse the mechanisms of price formation within the sector, assess market structure, and develop corresponding policy recommendations.

The research findings demonstrate that price formation in the sector is a complex, multi-factorial process, shaped by the combined influence of every link in the supply chain: producers, importers and distributors, and retail networks alike. Accordingly, prices are not determined solely by cost or margin, but are substantially influenced by working capital costs, commercial terms, logistics, and wider macroeconomic factors,” the document reads.

The commission’s conclusions indicate that the retail market exhibits competitive dynamics with a low degree of concentration; that profitability levels in the retail sector are consistent with international standards and do not point to excessive margins; that commercial relationships and working capital conditions play a decisive role in price formation; and that the high-low (Hi-Lo) pricing model is widely used across the market, whereby a significant proportion of products are sold at a discount, meaning that the actual average price is systemically lower than the standard shelf price.

The challenges identified relate principally to asymmetries in commercial power along the supply chain; high working capital requirements and extended payment terms; supply chain efficiency and logistics costs; and insufficient market transparency, particularly in commercial terms.

As the commission’s report makes clear, these factors together create a systemic pricing environment and constrain the scope for price reductions in the absence of structural change.

The commission recommends that effective policy should target not administrative price controls, but rather the structural improvement of markets, greater transparency, and increased supply chain efficiency. To this end, the report recommends: in the medium term, strengthening the institutional framework, standardising commercial relationships, and developing a sectoral monitoring system; in the long term, improving logistical efficiency and fostering the development of private-label products to sharpen competition; and in the short term, deploying targeted and time-limited interventions capable of delivering price reductions for consumers in certain product categories without materially disrupting the functioning of the market.

“Systemic factors drive price dynamics in Georgia’s FMCG sector. The effectiveness of any policy response will thus hinge on its ability to tackle the market’s structural shortcomings, promote transparency, and enhance supply chain efficiency. In this process, the implementation of targeted, proportionate, and phased policy measures is an essential precondition for both price stabilisation and the sustainable development of the sector,” the commission’s report concludes.

The full text of the document has been published on the website of the Parliament of Georgia.