Selling at a loss of fuel: the deafening silence of distributors, trapped by Elisabeth Borne

For several days, distributors have been explaining urbi et orbi, as if with regret, that they could not do more to lower fuel prices. “Chiche!”, the government responded to them this weekend. A bill tabled at the beginning of October should allow them to sell it at a loss from December, for a period of six months.

All distributors are invited this Tuesday morning to Bercy to clarify the scope of this unexpected measure. “We learned the news just a few hours before its publication in Le Parisien. She left us speechless,” says a distributor.

Suffice to say that the brands are not showing any enthusiasm at the possibility offered to them of losing money by selling fuel. As of Monday, none had yet officially reacted to the government announcement. Unofficially, one of them speaks of a “trap”, and another deplores “a policy of scribbling, big nonsense”. “We are not philanthropists: if we sell fuel at a loss, we will have to make up for it elsewhere and sell consumer products more expensively,” explains this distributor.

Will brands use this new right? The government assures that it has no intention of twisting their arm. “It is only a new tool made available to them to lower prices,” we emphasize at Bercy. The distributors have played the game very well with the anti-inflation basket, this time it is about giving them the possibility of keeping the price of fuel below 2 euros per liter. For them, fuel is a loss leader.”

The signs are less positive. “If this ban on selling at a loss has existed for so long without any distributor ever wanting to call it into question, it is because we need it to earn our living,” explains a distributor. TotalEnergies, for its part, has committed to capping unleaded and diesel at 1.99 euros per liter, but it can draw on its production margins.

A distributor anticipates: “There is only one who will really play the game, it’s Leclerc. The others will just show off by offering a reduced-price weekend here or there.” Not all brands will be as well equipped to face this extremely costly measure. E. Leclerc centers should aim to remain cheaper than their food distributor competitors.

Last week, Michel-Édouard Leclerc boasted, on his blog, of selling fuel cheaper than the 1.99 euros per liter promised by TotalEnergies. But other brands will not have the means to sustainably sell their fuel at a loss. If their price becomes attractive, they risk seeing their fuel sales soar… just like their losses.

Distributors find themselves, in fact, caught in their own trap. The Covid epidemic and food inflation have contributed to establishing them as “welfare companies” responsible for protecting the French and “exercising a public service mission”, underlines a note written by Jérôme Fourquet and Raphaël Llorca and published the year last by the Jean-Jaurès Foundation.

In recent months, brands have increased operations intended to protect the purchasing power of the French, competing with promotions and other operations at cost price. All have, at one time or another in the last two years, sold the fuel without margin; all offered anti-inflation baskets, made up of items at tight prices, or even at cost price at Système U. At the same time, distributors accuse their suppliers of fueling the rise in prices to preserve their margins. But distributors also need to earn a living, even if they prefer not to have to remind them.

Selling fuel at a loss could at least have one virtue, hopes a distributor: to contribute to obtaining a moratorium on the Descrozaille law passed last year. The bane of distributors, the latter provides for a 34% cap on promotions on hygiene and beauty products.

“This cap will once again hit the French people most in difficulty, by increasing the margins of the giants of the sector,” underlined Alexandre Bompard, CEO of Carrefour and president of the Federation of Commerce and Distribution (FCD) in a letter sent on September 7 to Bruno Le Maire and Olivia Grégoire, the Minister of Commerce. Considering the government's desire to authorize the sale of fuel at a loss, this limitation on promotions seems completely incoherent, underlines a distributor.