As soon as the ink on the chords dries, the work will be started again … in the coming days. “It seems necessary and logical to resume trade negotiations between food producers and large retailers,” analyzes Philip Goetzmann, a retail consultant. The surprising situation is that these discussions officially ended on March 1st.
→ ANALYSIS. Supermarket prices should go up
The request has been coming from farmers and industrialists for two weeks now. It was taken over by the government, which on Friday 18 March urged distributors, industrialists and farmers to take note “significant change in economic conditions”justified by the Minister of Agriculture Julien Denormandie.
For Philip Goetzmann, several phenomena are combined: “Farmers are in demand, in particular, due to the sharp increase in grain prices, so this is especially true for livestock farmers. Grain producers are affected by the rising cost of fertilizers. And on their side, industrialists suffer the most, and in addition, rising prices for energy and transport, all this leads to an increase in the cost of production. »
After the Covid-19 crisis, it was the war in Ukraine, unleashed after the negotiations on agreements, that caused a new surge in some types of raw materials. The impact on the food chain is “on the same scale or even more than in the first conclusion”, analyzes the government, referring to the waltz of the labels: +90% gas price, +36% wheat, +40% sunflower…
→ EXPLANATION. Commodities: Greater nervousness in wheat and oil prices
Tariff increase announcements made in early March – an average of +3% on the price of food paid to producers for the first time since 2014 – are thus out of date in some cases even before they go into effect. Law Egalim-2 already allows negotiations to be resumed to accurately account for differences in the cost of producers and processors. It remains to be seen who will pay for future increases, after all, when distributor margins are already very low, around 2-3%.
Christian Lambert, FNSEA President, “we will have to dare to talk about a substantial increase” food price. A topic that is still sensitive in France, but even more so in this presidential campaign, which is heavily focused on purchasing power.
In fact, as Philippe Moati, co-founder of the Observatory and Consumption Society (ObSoCo), points out, consumer goods rose “only” 0.7% in January 2022. “The consequences of the growth seen upstream on commodities will inevitably occur, even if there is a delay. At the same time, everyone will leave their margin, and consumers will also pay, which seems inevitable to me. »
Of course, this expert recalls, “the weight of food in the family budget has been steadily falling since the 1960s (26%) until about 2015, when this weight stabilized at about 13%”. But the humblest households (about 17% of their budget goes to food in 2019) are logically the hardest hit by this price increase. Moreover, according to statistics, it is the products with the mark “first price” and private labels that show the highest growth, since their prices are mainly based on raw materials, without any marketing component …
Can the upward trend in the number of labels be sustainable? Yes, without a doubt, Philipp Goetzmann answers. “I am afraid that Ukraine will become an event that fundamentally changes the rules of the game. he analyzes. This will disrupt energy, food and defense value chains, with an inevitable inflationary effect. »
An upward price revision in supermarkets could lead to more imports, with major retailers not shy about stating in the press that “If we revise terms, we also revise volumes. » In fact, for Philip Goetzmann “Supermarkets could increase their imports from cheaper countries so as not to pass on too large increases to the consumer.”
To get out of this vicious circle “in which we subsidize producers to help them live and consumers to help them buy with food stamps, it is necessary, in particular, says Philip Goetzmann, reduce taxes on producers, reduce regulatory restrictions, and increase the size of farms and SMEs. »