By how much will the prices of Danone yoghurts or Lesieur butter increase? Consumers will soon find out about this when they shop. The only certainty is that branded food products will suffer from inflation in 2022. This is the result of trade negotiations between manufacturers and distributors to set the price of national brands, which ended on Tuesday, 1uh March.
“Tough discussions”, “extremely tense negotiations” : As the fateful date draws near, the government has been hinting at the sharpness of the exchanges in recent days. In an effort to enforce the EGalim 2 law, passed in October 2021 and designed to ensure a more equitable distribution of value in the food chain in order to increase the remuneration of farmers, he continued to apply pressure. And we resisted the temptation to shift the schedule, although the pace of signing contracts was noticeably behind 2021.
The latest talks took place at the Paris Agricultural Show against the backdrop of soaring commodity prices exacerbated by the war in Ukraine. Discussions with large groups were the most heated. “We have just signed a contract with Lidl and we want to find an agreement by the evening”, Jean-Marc Bernier, general manager of Lactalis France, said on Tuesday morning. He calculated his need for price increases from 8% to 10%.
Compensation for non-food items
According to the government, some negotiations were finally completed on Wednesday at 8 am. To date, the signing rate is over 80% for most brands, with one or two exceptions. In the most conflicting cases, a mediator is contacted, and about sixty mediations are in progress. Even if we have to wait until the end of March to get a clear picture of the results, the trends are already showing.
First, food prices are generally rising, while hygiene, beauty, and personal care products are deflationary or stable. A direct consequence of the EGalim 2 law, which protects the share of agriculture in food. Thus, brands are trying to limit the growth of the consumer basket, catching up with non-food products.
However, the food industry, even if they have been promoted, say they are unhappy. “While companies asked for a 6% to 7% raise, they got 3% to 4%,” says Jean-Philippe André, president of the National Food Industry Association. While the surge in agricultural commodities was non-negotiable, in energy, transportation and packaging it was more difficult to pass them on to others.
“The Law of Rare Complexity”
“Negotiations, which are coming to an end, will lead to a significant price increase in 2022, from 3% to 4%, compared to 0% in 2021. This is an unprecedented growth in almost a decade, and will mainly focus on the priority of food. products, for its part recognizes the Federation of Commerce and Distribution. Before adding this “discussions have been very hampered by the rise in raw materials, the introduction of a new law of rare complexity, and the withdrawal of any discussion by some of the big industrialists in order to maintain their historically high profits.”
The real impact of these negotiations on the remuneration of farmers remains to be seen. Vegetable growers from the Eureden cooperative, owner of the D’Aucy trademark, already know that this year the price paid and contracted has been increased by 5-15% depending on the vegetable. The increase in the price of canned food affected the manufacturer’s agreements with brands.
Dairy farmers await verdict. “If you get half the increase that you asked for, we can also say that this corresponds to half the increase in agricultural raw materials,” warns Mr. Bernier. Not sure if the reasoning is in favor of the farmer.