Mad at Coca-Cola – Rewe boss accuses brand manufacturers of price gouging

Next to energy, food is currently the biggest driver of inflation in Germany. According to the Federal Statistical Office, the inflation rate in August was almost 17 percent compared to the same month last year. And in the coming months, the price increases will continue briskly.

At least that's what the industry giant Rewe, which includes the supermarket chain of the same name and the discounter Penny, expects. "Suppliers are currently announcing new increases every week," said CEO Lionel Souque in front of the Dusseldorf Business Journalists' Association (WPV). Not all of this can be prevented.

"Most of the industry behaves properly and is sensible," reports the manager. "We will then also accept price increases." After all, there are understandable cost increases for raw materials, packaging, energy, logistics and personnel. "But there are also many free riders who surf the price wave and simply want to improve their results," complains Souque, meaning "above all the large, international, listed consumer goods groups".

This can often be seen by just looking at the annual reports. “Many of these multinationals make more dividend income than last year.” Most of their decision-makers are not based in Germany. "They simply check whether the margin is right, and then they simply ask for a higher price." But Rewe isn't going along with that. "We're fighting it brutally," says Souque.

The manager cites Coca-Cola as an example. In analyst presentations, the group explains that it is cutting costs with austerity programs. "At the same time, however, they demand higher prices from us and justify this with rising costs," reports Souque. "We have a problem with that."

In the case of competitor Edeka, this mixed situation is now leading to Coca-Cola disappearing from the shelves. In any case, the “Lebensmittel Zeitung” reports on an escalated dispute between the two parties. Coca-Cola will no longer deliver to Edeka from September. The retailer, in turn, explained it to the connected markets in an internal communication with "unilaterally announced price increase demands from Coca-Cola, the amount of which lacks any factual basis".

Certain brands could also be missing from the shelves at Rewe in the coming weeks. In any case, Souque is known as a hardliner who doesn't shy away from big names. "We don't just wave everything through." Every price increase is examined in detail. And his company has plenty of opportunities for that.

"Because we have a large number of suppliers, are active in different countries and also have a deep insight into calculations thanks to our own brands, we can understand what is justified and what is not," explains Souque. In addition, his company has a purchasing partnership with the French chain Leclerc. "When you then hear that a supplier asks us 30 percent more, but in France five percent more for the same item, then I wonder where the logic is," describes the Rewe boss. "Then there are big discussions."

And that across the board. "There are disputes with many suppliers," says Souque. This currently also includes Intersnack Germany with the chips brand Funny. The company has both set high price demands and announced that it will reduce the capacity of the chip bags from 175 to 150 grams. The bottom line is an increase of 22 cents per 100 grams. “With our own brand, however, we only get five cents. So I'm wondering where the 17 cent difference comes from.” The Intersnack boss hasn't had an answer to that yet.

Souque is now appealing to everyone involved to jointly bear the additional costs. “The manufacturers come with price increases of ten percent and say Rewe should pass this on to customers. But that's totally unrealistic.” In the end, ten percent isn't enough. After all, there are also noticeable cost increases for retailers everywhere.

Example of energy: For a supermarket with 1000 square meters, the electricity costs would have increased from 80,000 euros last year to 140,000 euros this year. And in 2023 it will probably get even worse. One cannot simply burden the last person in the chain with all the additional costs.

Instead, manufacturers, retailers and consumers would have to shoulder the burden together. Rewe itself is already making advance payments. "We have already invested a three-digit million amount in the range this year," says Souque. This means: According to the manager, Rewe does not pass on higher costs in full and foregoes earnings in order not to allow shelf prices to rise even more. That will be seen in the next annual report.

This is probably also due to the fear of further customer losses. Because the shopping behavior of Germans has recently changed significantly. Souque sees three main trends: "Consumers are switching from brands to own brands, are buying significantly more products at special prices and are increasingly going to discounters instead of supermarkets."

This is also evident in your own company. Penny's sales are higher than in the previous year, while Rewe is doing worse. However, the level is still significantly higher than before Corona.

In the meantime, the overall market has recently stabilized somewhat, as current figures from the Federal Statistical Office show. According to this, retail companies in Germany made 1.9 percent more sales in July than in the month before, adjusted for calendar and price adjustments. In the food sector, after three months of negative figures, there was a real plus of 2.1 percent for the first time. Compared to the same month last year, however, the industry turnover in July was still 4.4 percent lower - and that despite the many price increases.

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