Located at a transport hub and surrounded by the most affluent districts of Buda, entry to the spacious Spar outlet in the basement of the Mammut mall is laid out to seduce customers into what might be termed its “consumer-comfort zone.”
Starting with a wall of pastries and crusty loaves, past trays of well-lit, colorful fruit and vegetables, before entering a corridor flanked by a long, well-stocked fresh meat and fish counter one side, and with dips, cold cuts and an alluring array of cheeses on the other, it is a walk few shoppers will complete without succumbing to the temptation of at least one impulse purchase, but probably more.
Certainly, late one afternoon prior to this newspaper’s editorial deadline, the store was busy with a healthy crowd of shoppers who, though not on their weekly household “big spend,” were happily topping up the pantry away from the oppressive summer heat outside.
Such clientele has helped Spar Hungary attain second place in the country’s retail rankings since 2022. Last year, the Austrian-owned chain, boasting 652 outlets of all sub-brands and sizes, achieved combined revenues of HUF 1.1 trillion, up by 4.8% year-on-year.
Only discounter Lidl outperformed Spar, with total sales of HUF 1.6 trillion, according to an analysis of the 2024 retail sector published by Trade Magazin in June.
Yet despite the nearly 5% increase in revenues, Spar Hungary’s bottom line makes for bad reading; last year the company lost nearly HUF 25 billion, on top of HUF 18 bln in 2023 and HUF 13 bln in 2022.
The primary cause, according to Spar Hungary CEO Gabriella Heiszler, is the government price controls limiting large retailers to a 10% margin on a range of 30 basic food groups. These measures were causing monthly losses of HUF 1.5 bln, the company outlined in a letter to employees in March, which was widely reported in the Hungarian media.
Nor is Spar alone; indeed, the country’s largest retailers, mostly foreign-owned, are all heavily burdened with the price caps and the associated package of restrictions, Tamás Kozák, head of the Hungarian Retailers’ Association (OKSz), tells the Budapest Business Journal.
“The operating costs in the retail business by far exceed 10%. This means that the margin that the regulation allows retailers cannot cover the costs associated with the sale of the products concerned. [This means] the expected losses of HUF 10 bln per month to the sector, meaning in excess of HUF 100 bln annually,” Kozák said
Moreover, the sector has to work with a VAT rate of not just the headline 27% applied to most items; to pay the “extra profit tax” applied to revenues (rather than profits), retailers are effectively working with a VAT rate of 31.5%, he argues.
Since this has to be passed on to customers, prices in Hungary are now less competitive than in neighboring countries, leading to cross-border shopping in some areas of the country.
Spar’s Heiszler, speaking at a conference in early April, was quoted in Hungarian media as saying: “We feel the crisis of confidence […] Győr has emptied out from a retail perspective; everyone is shopping in Slovakia.”
While this may contain some hyperbole, Kozák confirmed reports of groups, including pensioners, sharing cars to justify cross-border shopping in Austria and Slovakia.
The European Commission has also warned that the pricing restrictions are contrary to EU regulations on trade, not least because they impact foreign-owned companies in particular.
According to the commission, public authorities are obliged “to ensure the equal treatment and non-discrimination of economic operators and to refrain from restricting economic activities unless such restrictions are justified to attain certain public interest considerations.”
The EC initiated infringement procedures against Hungary over its mandatory caps in June, giving Hungary two months to respond to its complaints.
Meanwhile, Kozák tells the BBJ, the retailers’ association “hopes the government will lift the price caps” at the end of August, as scheduled. With food producers continually raising prices, the margins on products are “Shrinking, shrinking while losses are rising, rising,” he says.
The government mandated the latest price caps in March after intense pressure on retailers to reduce prices voluntarily. Prime Minister Viktor Orbán claimed at the time that retailers were implementing “unjustified and excessive price increases” unfairly burdening the public.
The restrictions, which cover 30 popular product groups including eggs, yogurt, sour cream, some cheeses, cooking oil and certain meat cuts, essentially limit retailers to a 10% margin between the product’s cost price and the list price to the customer.
Among other detailed regulations in the package, retailers are required to maintain a minimum stock of these products to ensure a steady supply to the public. In other words, retailers cannot evade the restrictions by limiting their orders and emptying their shelves of the products.
The measures are applied to retailers with income exceeding HUF 1 billion, and came into force when the latest inflation figures at the time indicated an annual rise of 7.1%.
Originally announced as a temporary measure applicable until the end of May, the government later extended the deadline to the end of August. It claimed in June that the price caps had reduced the prices of some 870 of the 1,000 affected products by an average of 20%, with 276 slashed by 30%.
However, while the short-term impact may result in limiting inflationary trends, the retailers argue that the caps result in the affected goods being sold at a loss, as the 10% margin is insufficient to cover the costs of storage, staff salaries, overheads and the “extra profit” retail tax, which is based on revenues.
Economists are also skeptical of the efficacy of price caps, with even the National Bank of Hungary, under governor György Matolcsy at the time, declaring an earlier set of price restrictions to be a failure in an analysis issued in February 2024.
Asked for his views on such caps, Lajos Bokros, a former finance minister and professor of economics at the Central European University, told the BBJ: “Price caps typically have three consequences: they create shortage in those items to which they are applied; they create distortions in the market and contribute to waste; and they increase the prices of those goods which are not subject to caps.”
He added: “Proportionality among these potential impacts may vary in time and space, but they are always present. They always reduce market efficiency.”
This article was first published in the Budapest Business Journal print issue of July 25, 2025.
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