Supermarket Negotiations Signal Near-Stability in Pricing Amid Inflationary Pressures
The Federation of Supermarkets (FCD) reports successful negotiations with manufacturers, resulting in stable pricing strategies for consumers.
Negotiations between French supermarkets and manufacturers have concluded, with the Federation of Supermarkets (FCD) announcing a 'quasi-stability' in pricing for consumers.
Layla Rahhou, the federation's general delegate, indicated that the negotiations reached an agreement with only a few exceptions outstanding, despite the challenges posed by major multinational corporations that 'played for time' during discussions.
The cost structure established in these negotiations influences final consumer prices, which retailers set based on desired profit margins.
According to insights from the FCD, the average supplier price constitutes approximately 72% of the retail price.
For instance, if a product is priced at €2.50 in stores, the supplier's price would typically be €1.80, leaving a margin of €0.70 to cover operational costs including staffing, logistics, rent, and energy, resulting in a minimal profit margin of about 2%.
Retailers traditionally maintain low or non-existent margins on popular branded items, such as Ferrero's Nutella and Coca-Cola, which consumers frequently use as benchmarks for overall pricing.
Sales below cost are generally prohibited, particularly in the food sector, which has mandated a minimum margin of 10% since the end of 2018. This regulation, established under the Egalim laws aimed at protecting farmers' incomes during negotiations, has reportedly cost consumers several billion euros without significant material benefit to agricultural earnings, according to consumer advocacy group UFC-Que Choisir.
Despite these concerns, there is a widespread consensus among agricultural unions, industrial stakeholders, and retailers to maintain the current pricing structure, with government plans to extend the existing provisions for another three to four years starting from April.
Patrick Mignola, the Minister for Relations with Parliament, noted that a comprehensive review of the Egalim laws is expected by late summer.
Since President Emmanuel Macron's first term, legislators have frequently addressed the volatile negotiations and their repercussions on farmer compensation, noting that large retailers account for about a third of agricultural product distribution.
Proposed legislative provisions for future negotiations include the 'sanctuarization of agricultural raw materials' to prevent the farmer's price from serving as a negotiation lever, although FCD representatives indicated that clarity regarding the cost of agricultural raw materials within negotiation packages is lacking.
Some manufacturers accused supermarkets of violating established laws by negotiating prices abroad and managing shelf space and promotional schedules to their advantage.
Retailers contend that international negotiations improve their leverage against major corporations like Mondelez and Nestlé.
During the negotiations for 2024, major purchasing centers E.Leclerc and Carrefour were penalized by the Directorate-General for Competition Policy, Consumer Affairs and Fraud Control (DGCCRF) for failing to adhere to the established negotiation deadlines.
Layla Rahhou, the federation's general delegate, indicated that the negotiations reached an agreement with only a few exceptions outstanding, despite the challenges posed by major multinational corporations that 'played for time' during discussions.
The cost structure established in these negotiations influences final consumer prices, which retailers set based on desired profit margins.
According to insights from the FCD, the average supplier price constitutes approximately 72% of the retail price.
For instance, if a product is priced at €2.50 in stores, the supplier's price would typically be €1.80, leaving a margin of €0.70 to cover operational costs including staffing, logistics, rent, and energy, resulting in a minimal profit margin of about 2%.
Retailers traditionally maintain low or non-existent margins on popular branded items, such as Ferrero's Nutella and Coca-Cola, which consumers frequently use as benchmarks for overall pricing.
Sales below cost are generally prohibited, particularly in the food sector, which has mandated a minimum margin of 10% since the end of 2018. This regulation, established under the Egalim laws aimed at protecting farmers' incomes during negotiations, has reportedly cost consumers several billion euros without significant material benefit to agricultural earnings, according to consumer advocacy group UFC-Que Choisir.
Despite these concerns, there is a widespread consensus among agricultural unions, industrial stakeholders, and retailers to maintain the current pricing structure, with government plans to extend the existing provisions for another three to four years starting from April.
Patrick Mignola, the Minister for Relations with Parliament, noted that a comprehensive review of the Egalim laws is expected by late summer.
Since President Emmanuel Macron's first term, legislators have frequently addressed the volatile negotiations and their repercussions on farmer compensation, noting that large retailers account for about a third of agricultural product distribution.
Proposed legislative provisions for future negotiations include the 'sanctuarization of agricultural raw materials' to prevent the farmer's price from serving as a negotiation lever, although FCD representatives indicated that clarity regarding the cost of agricultural raw materials within negotiation packages is lacking.
Some manufacturers accused supermarkets of violating established laws by negotiating prices abroad and managing shelf space and promotional schedules to their advantage.
Retailers contend that international negotiations improve their leverage against major corporations like Mondelez and Nestlé.
During the negotiations for 2024, major purchasing centers E.Leclerc and Carrefour were penalized by the Directorate-General for Competition Policy, Consumer Affairs and Fraud Control (DGCCRF) for failing to adhere to the established negotiation deadlines.
