Will the government’s promises really translate onto the shelves? While the government has been announcing substantial price reductions in supermarkets for weeks for the start of 2024, the risk of disappointment is looming. There could even ultimately be more increases than decreases, mass distribution and manufacturers are already warning together.
However, this was the promise of the executive when it presented its bill in September aimed at advancing commercial negotiations between suppliers and distributors, definitively adopted on Tuesday by Parliament. The executive's ambition was to pass on price reductions to consumers as quickly as possible. “This text will make it possible to pass on the price reductions of many consumer products more quickly on the shelves,” repeated Tuesday the Minister Delegate in charge of Digital Jean-Noël Barrot, who represented Bercy in the absence of his colleague in charge of Commerce Olivia Gregory.
But industry players have already warned that the results of the negotiations - which have just concluded and which must be completed by January 15 or 31, depending on the size of the industrial companies - may not be up to par with the expectations. “All the rates we receive to start the negotiation are up, they are between 6 and 10% up. We will have to reduce this to 2 or 3% maximum,” Michel-Édouard Leclerc, head of the strategic committee of the E.Leclerc centers, has already warned on Franceinfo last week.
Same story on the other side of the negotiating table. “Today, approximately two thirds of manufacturers have sent their price requests to distributors, which will therefore serve as a basis for negotiation. And today we are rather on upward trends,” admitted Wednesday on BFMTV/RMC Richard Panquiault, president and CEO of Ilec, an organization which brings together around a hundred giants of the agri-food industry and large-scale consumption - including Coca-Cola, Danone, Haribo, Unilever, Nestlé and Panzani. Even if these increases remain less significant than during the negotiations at the start of the year: “around a third of the requests are between 0 and 3%, a third between 3% and 5%, and a third above 5%. “, he clarified, adding that “for 2023, we were on 13%, 14%, 15%”. “We will not be seeing double-digit increases as in previous negotiations, but rather single-digit increases,” confirms a food multinational.
Also read Food inflation: why France is a bad student in Europe
First big industrialist to put his cards on the table: Coca-Cola. In an interview with Le Parisien published Monday, François Gay-Bellile, boss of Coca-Cola Europacific Partners France - producer and distributor of Coca-Cola, but also of Fanta or Sprite -, agreed to demand a 7% increase on average at mass distribution. “Please note, this does not mean that our products will increase by the same amount, since we will negotiate this figure with mass distribution,” he nevertheless clarified. “We know that between the announcement of prices and the final price, we often have a division by two,” observes Emmanuel Cannes, price and consumption expert within the NielsenIQ panelist.
A request for a price increase that the drinks giant puts down, among other things, to the rise in the price of sugar on world markets. “Sugar is an important component of many product categories, such as jams, sweet drinks or confectionery,” notes Emmanuel Cannes. We should therefore expect further price increases on the shelves for these products at the start of next year. Even if, on the executive side, we try to reassure. “We have noted requests for increases on sweet products, but they are moderate, of the order of less than 10%,” we report to Bercy.
Cocoa is also one of the agricultural raw materials which continues to see its price soar. Hence still significant inflation to be expected on chocolate at the start of 2024. A distributor also fears price increases on rice or orange juice. “There are many more agricultural raw materials that are increasing than those that are decreasing,” warned the boss of Ilec, Richard Panquiault, on Wednesday, citing “sugar, cocoa, tomatoes, oranges, rice , olive oil, potatoes, hazelnuts. The fault is “climate disruption”, according to the industrialist. “The harvests are bad everywhere. (…) A phenomenon which basically means that you will have to pay more for agricultural products.”
Also readToys, meals, tree… How much will Christmas cost you this year?
However, not all agricultural production is affected by these surges. Others, conversely, have experienced continuous declines on the markets for several months, which should be reflected on the shelves of certain products. This is the case for cereals, for example, with the result that a drop in prices is expected for pasta or animal kibble. Pork meat, vegetable oils, paper products and even coffee should also be included in this bearish category. “Everything related to drugstore-perfumery-hygiene should also decline,” they say in Bercy.
But commodity prices aren’t everything. “The share of agricultural raw materials in the added value of a manufacturer is not always very high,” notes Philippe Goetzmann, consultant specializing in mass distribution. The negotiation “also concerns everything that is around, cardboard and aluminum, and personnel costs which have increased” due to inflation, underlines Jean-Philippe André, the president of Ania (National Association of Food Industries), the main organization of food manufacturers. Enough to make projections even more difficult. Not to mention the varying power of manufacturers in the negotiation game, some like Coca-Cola being in a better position to impose their prices than others. Last step before putting on the shelves, the distributors' margin on each product also affects the final price.
On the government side, we assure that the promise will be respected. “The reductions will be reflected on the shelves in January-February, as soon as the commercial negotiations end,” we want to believe at Bercy. As for the increases already announced, “they will be smoothed over several months or delayed”. Translation: if a price is negotiated upwards to 10%, for example, the consumer will not see the product increase on the shelves by 10% from February 1st. As a result, shopping in February 2024 will perhaps be less arduous than in March 2023. “As there are more contrasts between what is increasing and what is decreasing, for the consumer there are perhaps more possibilities to "to arbitrate, to choose products which are falling rather than products which are rising", estimates Richard Panquiault.