2023-09-22 16:50:00
Anticipating annual commercial negotiations between distributors and national food brands, as desired by the government to curb inflation, might produce the opposite effect to that expected. The leaders of large-scale distribution alerted deputies to this risk on Wednesday September 20, who were hearing them within the Economic Affairs Committee of the National Assembly.
“If we move forward with negotiations, this must turn into something better for consumers. But today (…), the first signals we have from our suppliers are requests for increased prices. (…) If the subject is to advance trade negotiations so that they conclude with additional inflation more quickly for the French, it is a delicate point,” warned Dominique Schelcher, CEO of U system.
“(…) we are ready to anticipate the 2024 negotiations if a law proposes it. Except that to speed up the negotiation it takes two. And regarding the 75 main suppliers, only one, as I speak to you, has sent us their 2024 prices. The proposed increase is 10%,” added Thierry Cotillard, CEO of the Les Mousquetaires group.
“The discussions we have today with certain multinationals make us think that prices will increase (…) by between 5% and 15%,” he added.
On the basis of the requests for increases and decreases received in 2023, in particular for distributor brands, for which negotiations take place throughout the year, “ we can expect inflation in 2024 which will be around 3 to 4% in 2024,” for his part calculated Philippe Michaud, co-president of the E. Leclerc group, who even mentioned a “ latent inflation which lasts for a few years of this order.
FAO food price index down
The Ministry of the Economy has in fact announced that it is working on a bill aimed at anticipating annual commercial negotiations between distributors and national food brands. Normally organized, according to the law, between November 1 and the following March 1, these negotiations should this year open in October and close on January 15, according to The echoes. The bill should be presented to the Council of Ministers on September 27.
The executive thus hopes to manage to contain food inflation which, according to INSEE, increased by 11.1% last month over one year in France, by increasing the number of French households in precarious situations. eating. The objective is in particular to pass on the reduction in certain production costs as quickly as possible to shelf prices.
After an outbreak in 2021 and at the beginning of 2022, first due to the health crisis, then the war in Ukraine, international prices for most foodstuffs have in fact been decreasing for a year. In August, the food price index of the Food and Agriculture Organization of the United Nations (FAO) fell by 2.1% compared to the previous month, and by 24% compared to the peak reached in March 2022.
“International prices of all food products fell in August, except those of rice and sugar,” specifies the organization.
Despite pressure from the government, manufacturers, who for the first time following years of deflation obtained increases in their prices in 2022 and 2023, justified by the inflation of their production costs, have since refused to revise them downwards. . However, according to Les Mousquetaires, the evolution of the prices of agricultural raw materials, but also industrial raw materials, might allow “ to ask large groups to lower (their prices, editor’s note) by around 2 to 5% in certain markets.”
“Overall, it will be an increase”
Also heard by the Economic Affairs Committee of the National Assembly on Wednesday, the industrialists confirmed not only their refusal to lower their prices, but also their desire to request new increases justified, according to them, by a persistent increase in prices. production costs.
“There will be cases where there will be +10%. There will be cases where there will be -2%.” But “overall, we can imagine that it will be an increase,” recognized Richard Panquiault, general director of the Institute of Liaisons and Studies of Consumer Industries (Ilec), which represents around a hundred companies holding two thirds of the brands sold in supermarkets, while tempering: “The difference with the previous year is that there will not be systematic increases”.
“It is not certain that bringing forward the date of negotiations will make it possible to lower food prices,” also admitted Jérôme Foucault, president of the Association of Elaborated Food Products Companies (Adepale).
A persistent increase in cost prices
According to manufacturers, despite the fall in prices of most agricultural raw materials, inflation in production costs is still a challenge. The members of the Federation of Companies and Entrepreneurs of France (Feef, which brings together a thousand VSEs, SMEs and ETIs, food and non-food), “ despite everything that has been put in place,” have suffered an increase in their energy bill of 24% in 2022, and in 2023 of 49%, says their president, Léonard Prunier.
Agricultural raw materials represent “an increase of 9% this year, compared to 28% last year”. And the salaries, “at least 5% increase on average” he continues. “ Financial costs have exploded and make inventory financing very cumbersome,” adds Jérôme Foucault, who also recalls “the credit crunch that we have started to feel since July and which SMEs and mid-sized companies are using to finance, in particular, their investments in the decarbonization of their processes.” Not to mention that the costs of the ecological transition are increasing “ continuously “.
“Our cost prices are only increasing,” concludes Léonard Prunier.
The evolution of costs remains too uncertain at this stage to risk a reduction in prices: “ Most companies have visibility on their costs at the beginning of October,” note Richard Panquiault.
« SMEs and mid-sized companies have absorbed the shock of inflation by lowering their results since they have not managed to pass on all the inputs they have had. adds Léonard Prunier. Feef has calculated that 30% of its member companies are in deficit in 2022, compared to 24% in 2021, and that 49% of companies have a debt ratio greater than 7 years.
The margins at the center of the debates
Margins are at the heart of the conflict between manufacturers and distributors who accuse each other of increasing them at the expense of consumers.
“For the agri-food sector, INSEE calculated on May 31 that the industry margin rate reached 48.1%, or ten points more than the average of the last six years. At the same time, the institute calculated at the end of the second quarter that the gross operating surplus rose to the historic level of 7 billion euros, an increase of almost 19% over one quarter. recalled Nicolas Meizonnet, deputy of the National Rally.
A calculation rejected by Ilec, according to which, between January 1, 2022 and June 30, 2023, for a sample comprising more than half of the association’s members, costs increased by 2 billion, while the income generated only grew by 1.4 billion.
“Industrialists have covered two thirds of their additional costs”, says Richard Panquiault: “ Their margin is not improving, their margin is deteriorating.”
“The distribution margins today are good, they are even very good,” denounces for his part Jérôme Foucault. “ And the rise in rates allows them to now have financing linked to their working capital needs which are negative,” he adds, referring to a “ financial windfall which improves their results.”
Carrefour « made in France exactly 2.1% margin”, retorts its CEO, Alexandre Bompard, according to whom his competitors are “ in approximately equivalent orders.
“It’s a ratio of one to five with manufacturers,” he says.
Manufacturers nevertheless recognize that the increase in their prices will meet a limit: demand.
“Inflation is a scourge for our businesses. It’s a scourge for our operating accounts and it’s a scourge for our sales prices, because when we become too expensive we lose volumes, we lose competitiveness. (…),” recalled Miloud Benaouda, CEO of Barilla France and member of the board of directors of the National Association of Food Industries (Ania), which represents some 17,000 French food companies.
“If you go too far, the sanction is immediate,” he admitted.
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