Private label capping at 20% on shelves harshly criticized by retailers

Florin Barbu, Minister of Agriculture and Rural Development, proposed in the AgriFish Council of the European Union to limit private label products to 20% on the shelves of large stores. Florin Barbu motivated this proposal as "a beneficial measure for local producers" and that "national brands, not private labels, must remain in retail stores".

Florin Barbu stated: "Basically, we see in the retail store that a liter of private label milk is 5 lei, and the Romanian brand is 10 lei. This means that the commercial markup for the Romanian brand is very high. If my statements and my requests for amendment of Directive 633 on unfair commercial practices were read carefully, it is noticeable that I requested that, for each product category, the commercial markup be the same. As long as a private label product is sold for 5 lei, and the manufacturer has a price of 10 lei, I do not think it is a good and healthy thing. (...) It is a beneficial measure for Romanian producers. The Romanian brand must remain in retail stores, not the private label."

In practice, the Minister of Agriculture claims that he wants to balance the balance of power between retailers and suppliers, by limiting private labels, standardizing commercial surcharges and cutting practices considered abusive, such as "eliminating the re-invoicing of rebates and rebates” or "regulating discounts practiced by large retailers, at the expense of local producers”.

Retailers reacted harshly to Minister Florin Barbu's proposal. Feliciu Paraschiv, vice president of the National Association of Small and Medium-sized Retailers in Romania, warns that capping private labels at 20% risks hitting exactly those whom public policy should protect: consumers with limited budgets and small producers integrated into distribution chains through these brands.

"From our point of view, it is a rather intrusive measure on the free market. The market should be left free. We observe many attempts to intervene: price caps, limiting the commercial markup on the entire range of products and now limiting the private label. Private label means a category of products where the customer has access to the lowest prices. There are store chains in Europe where there is 80% private label. The implementation of Minister Barbu's proposal will certainly increase the value of products on the shelf, but also the diversity on the shelf. We will have more products, but more expensive", Feliciu Paraschiv told Digi 24.

PSD quickly entered the game of political support, demanding unity in the European Parliament to promote the minister's proposals. "The proposals advanced by Minister Florin Barbu aim to protect local producers from the abusive practices of large retailers and guarantee access to local agri-food products on the shelves of large chain stores. (...) In such situations, all Romanian political forces represented in the European Parliament must act unitedly to support the national interest," reads a press release issued by PSD.

The fact is that, while the minister talks about "beneficial measures for producers", traders invoke the risk of an "intrusive measure on the free market", and consumers remain caught between the promise of a more visible Romanian brand and the prospect of more expensive labels.