ISET-PI launched the Retail Food Price Index in July 2015. The project is implemented thanks to the cooperation of the largest Georgian retail chains including Carrefour, Goodwill, Fresco, and SPAR. While data from the individual retailers are confidential, the average of prices from all stores can be combined to create a general FPI, as well as FPIs for individual products. All of this will regularly be compiled and analyzed in ISET-PI’s publications.
What is the Retail FPI?
The Retail Food Price Index (FPI) is a measure of the weakly change in supermarket prices of a basket of food commodities. The basket consists of 33 food products (see the attachment), which account for 75% of the food spending of an average Georgian household.
Retail FPI can be used to analyze:
- Changes in Georgia’s terms of trade
- Price transmission from international markets to the Georgian market
- Seasonal fluctuations in demand for food products and agricultural supply
- Value chains
How is the Retail FPI calculated?
The Retail FPI is an average of food prices, which is then weighted based on the share of expenses of a particular commodity relative to the total food spending of an average household. The basket includes the following groups of food commodities: dry goods (flour, grains, sugar, oil, pasta, eggs), fruits, vegetables, meat, milk products, and drinks. Particular brands are used for most of the products so that prices are more comparable across supermarkets.
Prices have been collected on a weekly basis since November 2014 by ISET’s Agricultural Policy Research Center (APRC) in Tbilisi’s largest supermarket chains: Carrefour, Goodwill, Fresco, and SPAR.
What is different about Retail FPI?
The major difference between the FPI calculated by the National Statistics Office Georgia (Geostat) and ISET-PI’s product is how frequently data is collected. ISET-PI measures the index weekly and provides analysis of the findings, as opposed to just publishing the raw numbers on a monthly basis.
Another important difference is that ISET-PI researchers are looking at locally produced and imported food commodities. This allows us to better understand price dynamics for different groups of products.
Who can use the Retail FPI?
The Retail FPI can be particularly useful to consumers because it can serve as a tool for decision-making when purchasing food. Consumers can observe the average prices of food products and judge whether they are paying more or less than the average price. They can then modify their behavior and switch from one supermarket to the other based on observed average prices.
Besides consumers, the government can use the Retail FPI in order to better inform the policymaking process for food security. This is especially important given that Georgian households’ food expenses are relatively high – typically upwards of 40% of total expenses.
Farmers can also use the Retail FPI in order to see how much price mark-up their products see from the field to the store. This practice would help them set better prices when selling their produce.
Finally, supermarkets can use this information in order to define their price structures relative to their consumers and competitors.
ISET PI will be publishing analytical reports on a regular basis, giving weekly updates on food prices.
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