Supermarkets have been “absorbing” the rise in fuel prices without passing on the cost of the Middle East war to consumers. Association says it “is natural” to see a difference as early as April.
Week after week, since the start of the conflict in the Middle East, the cost of the food basket has been hitting new highs and fuel prices have soared. Without making a fuss, hypermarket chains have frequently warned of the war’s impact on their business, but it is from next month onwards that the consequences will really start to be felt on the shelves (and in people’s wallets). This is the view of Gonçalo Lobo Xavier, Director-General of APED – the Portuguese Association of Distribution Companies, who criticises the price comparisons that have been made.
The association representing distribution companies explains that any record-high prices for food baskets or other products sold by retailers in January are due to suppliers updating their price lists and wage scales at the start of the year and have nothing to do with the attack on Iran, not least because these were agreed in the fourth quarter of 2025. “The entire value chain will be affected by this rise in energy costs, from the farmer right through to agribusiness, logistics and transport. By the time they reach us, all these items have already been adjusted. It is natural that, from April onwards, we will begin to feel some difference”, said Gonçalo Lobo Xavier.
According to the director-general of APED, both food retailers and specialist retailers have shown an “enormous capacity” to “absorb fuel price rises in their operations” without passing them on to customers. For the time being, repercussions such as the rise in diesel prices, exceeding 10 cents per litre, have been felt only “in transport and logistics operations”, but “as soon as the various links in the chain begin to pass on these cost increases to the prices of goods and services, it will be difficult to maintain the ability to mitigate these impacts”.
For now, the major retailers assure us that they are absorbing the impact of rising oil costs, but if the conflict drags on, it is most likely that these increases will eventually be passed on to consumers.
“Customers are not yet feeling, across the range of products, an acceleration in inflation”, assured the Chief Financial Officer (CFO) of Sonae, which owns the Continente supermarkets, at the annual results presentation conference. João Dolores noted that “inflation in food retail is controlled inflation” and “overall” prices remain stable.
As for the future, it is “natural that if this situation persists over time, this inflationary pressure will also begin to emerge in the supply chain and among the group’s suppliers”, and there are already “some signs that this is happening”, he explained. Sonae’s CFO assured, however, that just as happened during the last wave of inflation in 2022, the company cushioned the impact for households. “We did our part, we lowered our margins, we accommodated and cushioned the impact on consumers at that time, and that is what we can guarantee now as well”, he emphasised.
Last week, Jerónimo Martins’ CEO, Pedro Soares dos Santos, also dismissed fears of food supply disruptions as a result of the war in the Middle East, not least because the rise in fuel prices “is the only impact that has so far had a practical effect” on the company, as it is “immediate”. Pedro Soares dos Santos acknowledged that the geopolitical context makes the situation “very delicate”, particularly in countries such as Venezuela and Ukraine, but it is necessary to “wait and see how things develop”.
Lidl, meanwhile, the third-largest player in the national food retail sector, presents itself as a “reliable partner, even in the face of the current conflict”. “At present, we do not anticipate being affected by significant supply chain constraints, which allows us to continue guaranteeing our low prices”, assures Bruno Pereira, purchasing manager at Lidl Portugal.
“We are constantly reassessing the situation so that we can react quickly and flexibly at any time, if necessary, in order to continue meeting our customers’ day-to-day needs without forcing them to change their Lidl shopping habits”, adds the same spokesperson. With its own-brand products accounting for “75% of the range” sold, the retailer, which now has over 290 stores across the country, notes that “in a context of inflation, we are combining the promotion of our own brands with measures to provide immediate financial relief”.
“Through direct price reductions on hundreds of essential items (a strategy covering around 600 products in 2025), we ensure that the economical choice does not compromise the quality demanded by consumers, providing real and practical support for Portuguese families’ budgets”, notes Bruno Pereira.
“We are monitoring the current situation, maintaining our pricing policy for our customers”, said Filipa Rebelo Pinto, product director at Auchan Retail Portugal, which last year completed the acquisition of Minipreço. Without revealing whether price changes are planned, she says that drops in consumption or changes in purchasing patterns will depend “heavily on the impact at national level, given that customers tend to be quick to alter their consumption depending on the scale and speed of the impact”.
Against a backdrop of growing demand for so-called private-label products, Filipa Rebelo Pinto points out that, in Auchan’s case, “our own-brand products continue to gain ground, meeting an increasing number of customer needs at a very competitive price”.
Even so, there are external influences on consumer confidence, which not only affect purchasing power but can also alter decisions (and restrict choices) in the supermarket aisles. “The INE [reported that], prior to the situation in the Middle East, there had already been a dip in consumer confidence, following two months of growth. It will therefore be difficult for consumer confidence, given its correlation with consumption, not to be adversely affected itself”, says the APED representative.
Asked about inflation at a press conference, the CEO of Pingo Doce’s parent company indicated that “it will be extremely challenging” to maintain the same operating profit and margin recorded in the fourth quarter of 2025. “Because it’s not just about food. If everything surrounding a person’s life — interest rates, fuel prices, their entire social life — skyrockets, people will have to make choices. And we know that, in our business, maintaining volumes is crucial for both the business and suppliers”, said Pedro Soares dos Santos, referring to EBITDA and the corresponding margin for October to December, which stood at €668 million and 7.1% respectively.
Intermarché is keeping a close eye on developments in the conflict – which saw renewed hopes of a ceasefire this Tuesday – and has been “ensuring a continuous supply” to customers. However, Bricomarché’s sister hypermarket chain advocates “progressive measures” to mitigate the risks. “In Portugal, this situation is reflected above all in increased pressure on prices and the need for more rigorous supply chain management”, it warns.
Is zero VAT ‘premature’ or ‘a charm’?
Against this backdrop of crisis, governments across the Iberian Peninsula are responding in different ways. Whilst the Moncloa Palace has put forward a more comprehensive plan to try to control the impact of energy costs on Spanish households, São Bento has opted to temporarily reduce fuel taxes. The secretary-general of CAP – the Confederation of Portuguese Farmers, Luís Mira, argued on Observador radio that Luís Montenegro’s government should follow the measures announced in neighbouring Spain, which has even gone so far as to provide support for the purchase of fertilisers for agriculture.
This is one of the Achilles’ heels for the owner of Pingo Doce, which operates in this sector through Jerónimo Martins Agro-Alimentar. António Serrano, CEO of the subsidiary that recently acquired the Luís Vicente fruit and vegetable group, said that electricity prices are “more or less” under control as they have been “fixed for a few years”, but fertiliser prices have risen by “over 60%” since the attack on Iran. This is the case with urea, he explained at the press conference presenting the annual results.
On this subject, the chairman of Mercadona noted that “the future is uncertain” and that “business leaders must adapt” to the geopolitical context. Speaking from the company’s headquarters in Valencia, Juan Roig simply stated that “prices rise and fall due to [fluctuations in] raw materials”, and therefore “do not depend on any retailer” in the food sector.
This reignited the debate over the possibility of reinstating zero VAT on a basket of food products. Asked about this measure, adopted in the wake of the war in Ukraine on both sides of the Iberian border, Mercadona’s CEO, Juan Roig, stated that he would be “delighted if the governments of Portugal and Spain were to enact it tomorrow”. “But that doesn’t depend on us”, added Juan Roig. It depends on the legislators – and it is an issue on which there is pressure from the opposition.
Speaking at the results presentation conference last week, the head of Sonae, which closed last year with record sales of over €11 billion, advocated the adoption of measures similar to those taken in 2022, at the start of the war in Ukraine, to cushion the impact of rising prices on consumers. Cláudia Azevedo admitted that she “really likes” the zero VAT rate and stressed that everyone must do their bit to reduce the impact on households.
“The last time [there was inflationary pressure], the measures affecting the value chain took some time to take effect, but in the end I think it was a balanced approach, involving state aid and the various players”, explained the Sonae chief executive in response to journalists’ questions at the annual results presentation. On concrete measures, Cláudia Azevedo said that “it is better to work on a joint solution” and that the previous solution “could be replicated, in its various components”.
Asked about the reinstatement of zero VAT, the businesswoman was very much in favour of this measure, emphasising that “all players in the value chain must play their part”. “And the State is one of them, and last time it acted responsibly. I think this time we will find a solution, all together, and cushion the blow” for families, she noted.
For the director-general of APED, this measure is still out of the question. “The return of zero VAT on a basket of essential food products seems to us, for now, to be premature. It has been 25 days since the conflict in the Middle East broke out. In the case of the sharp rise in energy and raw material prices and the wave of inflation triggered by Russia’s invasion of Ukraine in 2022, that measure was eventually implemented 13 months later”, recalls Gonçalo Lobo Xavier.
In his view, introducing a zero-rate VAT for such a “short” period, without knowing the specific impacts on consumption and costs – or how these “will be distributed throughout the value chain” of distribution and retail – “would have an insufficient effect in supporting the most disadvantaged families”. “Of course, if this is the government’s decision, the food retail sector will, once again, be ready to scrupulously comply with whatever is decreed”, noted the head of APED.
The Os Mosqueteiros group has a slightly different view. An official source at Intermarché told ECO that the reintroduction of zero VAT on a basket of goods, as happened in 2023, could “constitute a relevant tool for mitigating the impact of rising fuel prices, in a context marked by tensions in the Middle East”. However, the company suggests “some technical adjustments”.
Intermarché’s main proposal was to amend the basket of goods. In other words, to update it so as to “reflect the current reality of national consumption and new inflationary pressures”, and even to introduce a phased plan. “Furthermore, a review of the monitoring mechanisms would be essential to ensure that tax reductions are effectively passed on to the end consumer. Finally, we believe that the measure would benefit from a clearer definition of its duration, ideally with a phased timetable, to avoid any ambiguity regarding the end of the scheme”, proposes the multinational.
The price list that will be in place at petrol stations on Monday and the outcome of any US-Iran negotiations will determine what kind of Easter the Portuguese will have.
