Due to persistently high inflation, the government has taken further steps to curb consumer prices: following the previously introduced food margin cap, household chemicals and toiletries are now also subject to regulation. According to the latest regulation, from May 19, 2025, a margin limit has been imposed on these products as well. The government decree is valid until August 31 and covers nearly 30 product categories—including detergents, shampoos, and toothpastes.
Background and Purpose of the Margin Cap
The current regulation is preceded by the margin regulation on food products introduced in March 2025. At that time, the government set an upper limit on the retail profit margin of basic foods such as milk, bread, or eggs, aiming to reduce store prices without directly intervening in market pricing. As a result, the prices of several products decreased or did not rise further. The positive experiences likely laid the foundation for similar regulation extending to drugstore products.The aim of the margin cap on toiletries is to reduce consumer prices by 16–18% for products where retailers previously worked with profit margins typically above 30%.
Who Does the Margin Cap Apply To?
The new regulation applies exclusively to stores that primarily sell drugstore products. This means, for example, that for shampoo or toothpaste, a 15% margin cap applies in drugstores, while the same product can be freely priced at market rates on the shelves of a grocery store.
Expected Market Effects
The margin cap may reshape the retail market: consumer habits, competitive positions, and retailers’ sales strategies could all change. Drugstores may gain a competitive advantage, but they also face the need to adapt. Due to the stricter margin, they are likely to focus on cost reduction and on products outside the margin cap, while more favorable prices could stimulate demand for the entire range.
The margin cap may affect the entire supply chain by narrowing retailers’ room for maneuver: it would be a logical step for stores to remove regulated products from their assortment or keep only minimal stocks. However, the regulation for drugstores prevents the artificial narrowing of the assortment by stipulating a stockholding obligation. The affected products must be kept in stock and sold in at least the average daily quantity for a specified period. This may increase inventory costs and liquidity burdens, especially when affected products can only be sold with low margins or at a loss. Retailers are expected to exert price reduction pressure on their suppliers to compensate for lost revenues, which could burden other supply chain participants and reduce its flexibility. Therefore, it is crucial for market players to adapt well to changing circumstances and find sustainable solutions.
Market Reactions
The market has already responded: some players have introduced quantity limits and coupon exclusions for the affected products. Other retailers—such as grocery chains not subject to the decree—are also offering discounts, hoping to gain a marketing advantage. By committing to price reductions, grocery chains expect increased turnover, as customers often buy full-priced items alongside discounted products.
What Do Companies Need Now?
Such interventions require not only quick responses but also strategic re-planning. As consultants, we help our clients find the balance between regulation and sustainable business growth. We not only prepare strategic analyses but also provide practical support and take responsibility for implementing solutions. Our deep industry experience—whether in classic retail, electronics, or healthcare—enables us to respond specifically to challenges. Our focus areas may include:
- Identifying revenue growth opportunities: We help rethink concepts, develop product assortments tailored to customer needs, and improve merchandising.
- Procurement and supply chain optimization: We support improving procurement activities and making warehousing and logistics processes more efficient.
- Rationalizing cost structures: We develop proposals for the sustainable transformation of operational activities to increase efficiency and maintain or improve profitability.
The Future Is Uncertain
The margin cap on food products was originally valid until May 31, but the government has recently decided to extend it until August 31. This is expected to further shape market competition and consumer habits, but it is still not too late to adapt. Our team of experts is ready to support businesses in responding flexibly and confidently to these changes, as we cannot know how long margin restrictions will remain in place—whether for food, toiletries, or other product groups1.