Monday 20 March 2023

Why did the price of bread drop? Global and local conditions drive sales

VAT reduction and stability in the wheat market favor the accessibility of bread for the Costa Rican diet

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18 March 2023 - At The Banks - BCCR

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QCOSTARICA – The Musmanni chain of bakeries applied a significant reduction in the price of bread in all its bakeries thanks to external and internal factors that would reactivate consumption projections in Costa Rica.

The typical Costa Rican baguette, the melcochón

The main causes for this change are two: the reduction of the Impuesto al Valor Agregado (IVA) – Value Added Tax (VAT) – and an improvement in the conditions of the global wheat market.

Luis Diego Montero, Manager of FIFCO Retail, owner of the Musmanni brand, explained that in 2023 the 13% Value Added Tax (VAT) will be decreased to 1% for several of the bread products that were included in the basic basket, including the melcochón, the typical Costa Rican baguette.

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As of February 1, the melcochón with cheese entered the list of staple foods and will go from ¢900 to ¢800 colones, a reduction of ¢100 colones (-11%). The simple melcochón will cost ¢25 colones less, since it was already part of the basic basket, dropping from ¢775 to ¢750 colones. In addition, Musmanni activated a promotion on Tuesdays and Thursdays of three simple melcochónes for ¢1,500 colones, which reduces the unit price to ¢500 colones each, (-35% less).

Other bakeries and bread outlets are expected to follow the Musmanni lead.

Relief to households

The reduction in the price of bread becomes a relief to the household budget, where according to indicators from the National Institute of Statistics (INEC), between December 2019 and December 2022, the monthly per capita cost of bread and cookies inside the basic basket went from ¢4,086 colones to ¢5,298 colones, an increase of ¢1,212 colones in a two-year period.

According to Montero, “there is no doubt that the price of bread receives a lot of attention, due to the number of people who depend on its preparation and sale for a living. Both groups were strongly affected by the shortage of wheat, the high cost of raw materials in the manufacture of bread, and the increase in the price of fuel, all factors that caused the average cost of bread went up three times the previous year,” he explained.

He also highlighted the positive impact of price changes on the final consumer.

“The announcement of a discount, and the promotions that accompany it, become good news for households and generate new opportunities for consumption of a product so present in the Costa Rican diet, such as bread, due to its nutritional value, its contribution of energy and its capacity to generate moments of sharing and enjoying,” emphasized Montero.

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