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Inflation: large retailers deplore the immobility of manufacturers to renegotiate prices

A new twist on the food inflation scene.

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Inflation: large retailers deplore the immobility of manufacturers to renegotiate prices

A new twist on the food inflation scene. While last week, agro-industrialists claimed to have already resumed negotiations with distributors, bosses of major retailers claim the opposite. For Dominique Schelcher, CEO of Système U, and Michel Biero, executive director of Lidl France, the big brands have still not come to the negotiating table despite their statements. No discussion would therefore be underway to adjust the selling prices of branded products to the recent falls in the price of raw materials.

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

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 clarified that many of the 75 giants of the agro-industry had backtracked after their declarations of good intentions, blocking any reopening of negotiations. But "industrialists must move from good will in the media to reality in the discussions," he castigated. A point of view shared by Michel Biero, the executive director of Lidl France. On the set of BFM Business, the latter declared that only two out of seventy-five companies 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 they are to blame. "The decline is really triggered on the side of distributor brands, that is to say our products like the U brand for example, and also the first prices", says Dominique Schelcher. Private label products follow fluctuations in world commodity prices more closely, particularly those of wheat and oils. The reason ? Less intermediaries and marketing, but also faster price adjustment. Producers and distributors can negotiate throughout the year, and thus adjust the labels on the shelves accordingly. "There is no law for the modernization of the economy which prevents this from being done", explains Michel Biero.

However, 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 define prices that apply all year round. For Dominique Schelcher, "this system is no longer valid and is no longer operational when there are price variations as there are currently". With our German and Spanish neighbours, discussions take place all year round and according to the CEO of System U, there are already effects on the consumer basket with “a drop in all these products” which have seen their prices decrease.

But in France, manufacturers seem to turn a deaf ear to Bruno Le Maire's summons. The latter had however brandished the “name and shame” policy, ie making public the names of brands refusing to negotiate to invite them to 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 March 1 to be able to reopen a discussion. Only, this would not be the case for any ingredient. The executive director of Lidl France takes the example of wheat, whose “price has fallen by 40% since October 1 but only 12% since March 1”.

However, Michel Biero observes a significant decrease in volume sales of branded products in his 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 is counting on this drop in sales to make the manufacturers listen to reason, and thus finally renegotiate the prices on the shelves downwards. .

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