Inflation: end of negotiations between manufacturers and supermarkets, price increases in sight

Europe 1 with AFP 11:44 a.m., February 27, 2023

On March 1, trade negotiations between large supermarkets called by Emmanuel Macron to "participate in the effort" and their agro-industry suppliers come to an end.

The discussions are stormy in an inflationary context which raises fears of new price increases.

How much will the shopping cart cost in March, May or July?

The price of a majority of products sold in large food stores, from the leader E.Leclerc to Casino via Carrefour, depends on the purchasing conditions negotiated until midnight Wednesday by these brands with their industrial suppliers.

They are free of the price of the foodstuffs they sell to the consumer, provided they respect a minimum margin of 10% provided for by law.

But they must negotiate each year with the agro-industry the price and the conditions of sale, in yogurt, meat or biscuits.

Their interest is to obtain the best conditions to be able to be competitive on their prices while protecting their profit margins.

This is all the more crucial this year as store operating costs soar, especially electricity bills.

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Price spike?

Except that manufacturers, too, are facing inflation in their production costs, from agricultural raw materials to packaging, and have been asking supermarkets for months to buy their more expensive products.

At the Agricultural Show on Saturday, Emmanuel Macron called on distributors to "participate in the effort".

"We cannot ask for an effort" from farmers, given the increase in energy and "various inputs", he estimated, and agro-industrialists, "many SMEs all over the territory", " have made a considerable effort in recent years".

For their part, supermarkets are crying out for the lack of transparency, and for requests for exaggerated increases, the boss of Carrefour Alexandre Bompard even calling some of them "delusional".

Whatever the outcome of the negotiations, prices on the shelves will increase further.

Already, because the supermarkets committed in December - in a non-legally binding document - to "take into account, without negotiating them, the cost increases suffered" by their suppliers, especially the smallest ones. 

“Anything but delusional” requests for increases

Then, because the requests for increases are "anything but delusional", according to Jean-Philippe André, president of the agri-food lobby Ania.

"Raw materials are more expensive than last year, and we have purchased energy at current rates for the whole year."And more than a "red March", there "will be more l food inflation (...) throughout the first half of 2023", predicted the president of System U Dominique Schelcher Monday on France inter.

Proof of these tensions, only one in two manufacturers had signed all their contracts with their distributor customers in the middle of last week, an unusually low rate a few days before the close.

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“Very serious” subject

"We are concentrating the negotiation dispute over a few days and that is obviously very bad", commented the Minister of Agriculture Marc Fesneau on Public Senate on Monday, noting that "there has been a delay" in these negotiations.

The distribution ensures that it cannot absorb these price increases alone and will therefore have to pass them on to its customers, who have already suffered 12% food inflation in 2022 and are themselves facing the increase in gas or fuel.

To this food inflation already suffered, it is "about 10%" additional which will be added "in the weeks and months to come", according to Mr. Schelcher.

The government is trying to provide answers with an anti-inflation basket project, a selection of references with the best quality/price ratio, which however faces many criticisms and uncertainties.

Do away with overpriced products

French households did not wait to adapt, turning to roughly equivalent but more economical products, such as first prices, and to brands perceived to be cheaper.

A quest for the lowest price which makes it all the more crucial for supermarkets to obtain the best possible purchasing conditions in order to display lower prices than the competition.

If prices rise too much, the entire agri-food chain is exposed to a drop in volumes sold, because customers would deprive themselves of products that have become too expensive.