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Inflation: supermarkets deplore the inaction of manufacturers to renegotiate prices

2023-06-05T15:00:47.876Z

Highlights: Last week, agro-industrialists assured that they had already resumed negotiations with distributors. For the bosses of Système U and Lidl France, manufacturers would still refuse to start discussions aimed at correlating shelf prices to declines in raw material prices. No discussions are therefore underway to adjust the selling prices of branded products to the recent declines in commodity prices. In our German and Spanish neighbors, discussions take place all year round, and thus adjust the labels on the shelves accordingly.


For the bosses of Système U and Lidl France, manufacturers would still refuse to start discussions aimed at correlating shelf prices to declines in raw material prices.


New coup de théâtre on the scene of food inflation. While last week, agro-industrialists assured that they had already resumed negotiations with distributors, bosses of major brands say the opposite. For Dominique Schelcher, CEO of Système U, and Michel Biero, executive director of Lidl France, the big brands have still not sat at the negotiating table despite their claims. No discussions are therefore underway to adjust the selling prices of branded products to the recent declines in commodity prices.

However, "trade negotiations have resumed" had assured last week Jean-Philippe André, the president of the National Association of Food Industries (Ania). This statement, questioned in the wake by the Minister of the Economy, Bruno Le Maire, has just been categorically refuted. For Dominique Schelcher, CEO of Système U, "for the moment, not much is happening" even if 75 industrialists had publicly committed to discuss again.

False pretense of industrialists

In reality, only "a handful" of them would be ready to start discussions, but "the majority did not even respond to our call, following that of the ministers". At the microphone of France Info, the boss of the U stores also said that many of the 75 giants of agribusiness had backtracked after their declarations of good intention, blocking any reopening of negotiations. But "it is necessary that the industrialists move from goodwill in the media to reality in the discussions," he castigated. A view shared by Michel Biero, the Executive Director of Lidl France. On the set of BFM Business, the latter said that only two companies out of seventy-five had said they were ready to discuss with the hard discounter.

If food inflation slowed slightly in May, reaching +14.1% against +15% last month according to INSEE, distributors believe to be at the origin. "The decline is really triggered on the side of private labels, that is to say our products such as the U brand for example, and also the first prices," says Dominique Schelcher. Private label products are more in line with fluctuations in world commodity prices, particularly wheat and oils. The reason? Less intermediaries and marketing, but also faster price adjustment. Producers and distributors can negotiate all year round, and thus adjust the labels on the shelves accordingly. "There is no law to modernize the economy that prevents us from doing so," says Michel Biero.

This is not the case for negotiations between distributors and manufacturers of major brands. These take place over a well-defined three-month period, from December 1 to February 28, and set prices that apply throughout the year. For Dominique Schelcher, "this system is no longer valid and is no longer operational when there are price variations as there are currently". In our German and Spanish neighbors, discussions take place all year round and according to the CEO of Système U, there are already effects on the basket of consumers with "a decline in all these products" who have seen their prices decrease.

Ineffective pressure strokes

But in France, industrialists seem to turn a deaf ear to Bruno Le Maire's summons. The latter had, however, brandished the policy of "name and shame", i.e. making public the names of brands refusing to negotiate to invite their boycott, as well as an increase in taxation on the margins of agro-industrialists. But apparently, nothing would help. For Michel Biero, it is the fault of renegotiation clauses that are difficult to reach. For example, the price of one of the main inputs of a product - one of the raw materials - must have fallen by more than 20% since 1 March in order to be able to reopen a discussion. Only, this would not be the case for any ingredient. The executive director of Lidl France takes as an example wheat whose "price has fallen by 40% since October 1 but only 12% since March 1".

" READ ALSO Private labels, big winners of inflation

However, Michel Biero observes a notable decrease in volume sales of branded products in its stores. If the threats of the executive and the solicitations of the distributors do not seem to have borne fruit, the boss of Lidl France counts on this fall in sales to make the manufacturers hear reason, and thus finally renegotiate the prices on the shelves downwards.

Source: lefigaro

All news articles on 2023-06-05

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