Food prices continue to soar in shops: +17% over one year, according to INSEE. This surge in prices should soon calm down according to the latest projections, and even reverse. But when will it hit supermarket shelves? As soon as possible, asks the Minister of the Economy Bruno Le Maire to the food manufacturers in a letter that franceinfo has obtained.
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A letter intended to put real pressure on manufacturers. The statement is obviously very polished, but Minister Bruno Le Maire is quite clear in his requirements. “Several indicators lead the Banque de France to envisage a decline in inflation in the first halfhe wrote. Our fellow citizens, who have been asked to assume the consequences of the inflationary context on the price of the products they buy daily, would not understand, rightly, that the price reductions to come upstream in the economic chain are not returned to them symmetrically.”
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This deserves some explanation. It should be noted that prices are theoretically fixed from one year to the next during annual negotiations between the food industry and large retailers. The Egalim laws, resulting from the states general of food, have already provided that these negotiations can reopen in the event of a surge in the prices of raw materials. This is what happened last year with the war in Ukraine, when the price of gas soared. However, gas is needed at all levels, to manufacture nitrogen fertilizers, to cook food, to manufacture glass, among others. Manufacturers obtained a 10% increase in their prices on average.
A necessary renegotiation of downward prices
This time, the minister takes the lead and explains that this renegotiation must work in both directions, upwards and downwards. In other words: if the price of raw materials falls, everyone must benefit. The Banque de France expects inflation to fall by mid-year,
and therefore lower food prices.
This decline has already begun. The Food and Agriculture Organization of the United Nations, FAO, notes that food prices have fallen by 20% in one year. Hence the Minister’s conclusion in this letter sent to manufacturers, but also addressed to supermarkets: “We are now asking suppliers, major manufacturers and players in the mass distribution sector to register voluntarily (…) with a view to infra-annual renegotiation of contracts, so that the sale prices are reviewed at the drop (…). We urge distributors (…) to ensure that any price reductions that may result from this renegotiation are returned to consumers when the time comes, in full and without delay.”
“Yes, we have to renegotiate,” says the Trade Federation
“Overall, we can clearly see that prices for products such as wheat or transport have fallen a lot compared to a year ago. So there is no reason not to transcribe it in the purchase prices for industrial”, reacts Friday on franceinfo Jacques Creyssel, general delegate of the Federation of commerce and distribution (FCD). “This letter is very good news”rejoices the manager, for whom “yes, we have to renegotiate”, because “a lot of prices have gone down”.
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The FCD believes, however, that the government’s request “mainly concerns very large companies” of which many of them “took advantage of the situation to increase their prices significantly and increase their margins”. This concerns in particular “Coca-Cola, Nestlé, Ferrero, Nutella, L’Oréal”, assures the general delegate of the FCD. “These big companies have very high margins, have increased their prices significantly because they have products that are considered a bit essential on the shelves. And so they have the ability to impose very strong price increases. “
Industrialists to “make an effort”
Jacques Creyssel affirms that the increases requested by manufacturers, “which they have partly obtained, are higher than what was really necessary by the rising costs”. “When the costs rose a lot, the distributors agreed to raise the prices. Now, we have to go back the other way,” hammers the FCD.
This reduction should be “as quickly as possible and in the most efficient way possible so that there is a translation as of this summer in the prices paid by all of our customers”, promises Jacques Creyssel. But he says distributors can’t lower prices until manufacturers do.. “We have extremely low margins, around 1%. So we have the weakest price reduction capacity that can exist.” The drop in prices, the distributors did it “in general, particularly in the context of the anti-inflation quarter. We made this commitment to the government and the French”. FCD is now asking “that industry groups accept” et “make an effort”. Distributors cannot “do it on all the products that are sold excessively expensive today by these large manufacturers who have margins that are ten or fifteen times higher than ours”, adds Jacques Creyssel.