If the trade negotiations have resulted in price increases of around 10%, they do not concern all the products that we put in our shopping carts. The additional inflation should rather be between 4 and 7% by June according to Iri.
+10%? +15%? +20%? How much will the price increase be on our shelves? While commercial negotiations between distributors and suppliers ended on Wednesday evening, the new prices should come into force in the days or weeks to come.
How big will the increase be? While 95% of the contracts have been signed, retail managers estimate that the increase will be around 10%. This is what Michel Biero, the boss of Lidl, thinks in particular, but also Dominique Schelcher, that of System U.
But that does not mean that your shopping will cost you 10% more from this Thursday.
“It won’t be 10% in March, the labels won’t change tomorrow morning, explains Philippe Goetzmann, retail expert. What’s changing this morning is that the distributors, when they place orders, they switch them to the new price. By the time orders are delivered, it can take at least two months for some products.”
No “red March” therefore, but an inflation which should continue in the food sector at least until June.
Will this increase really be 10% in the coming months compared to current rates?
Here once more, this figure must be put into perspective. While the negotiations have probably resulted in 10% increases in purchase prices, they only concern national brand products, i.e. the references found in all brands such as Nutella, Coca- Cola, Danone yoghurts or Nestlé Frieskies croquettes.
However, these products represent only a part of the products sold in supermarkets.
“The big brands have asked for between 10 and 20% increase but for SMEs it is rather between 6 and 9%, estimates Emily Mayer of the company IRI. In addition, a third of the products sold are private labels which are not not on this model of annual negotiations. And finally, 15% of consumer products are not food and are less inflationary.”
“Records never seen”
In the end, the Iri company estimates that the overall increase in prices of consumer goods should rather be between 4 and 7% by next June compared to February 2023 prices.
This constitutes a significant increase following an observed inflation of 14.5% between February 2022 and February 2023. But which should not result in an explosion in prices greater than the rise of recent months.
It will also depend on the brands and their ability to use their margin to limit increases. So far, we are seeing a large two-speed distribution with on one side those who have reduced their margin and those who cannot follow the race.
“There have always been more expensive signs and others less expensive, recalls Emily Mayer. But this is reaching unprecedented records.”
The price corridor (the average difference between the two most expensive brands and the two least expensive on national brand products) which was around 15 points before the war in Ukraine reached a peak of 30 points in February. Concretely, this means that you will pay 100 euros for the same shopping trolley in an X brand and 130 in a Y brand. And this may only be the beginning.
