2023-05-18 07:24:44
Noa Moussa// Photo credits: DENIS CHARLET / AFP
The biggest French food manufacturers have agreed to reopen negotiations with distributors by the end of May. Last March, the discussions concluded with an overall increase of 10%, due to the rise in the cost of raw materials, but also the financing of their energy transition. A questionable point.
The price of your shopping cart could soon drop. The 75 largest French food manufacturers have agreed to reopen negotiations with large retailers. Last March, the latest discussions resulted in an overall increase of 10%. The argument put forward by manufacturers is the soaring cost of raw materials, as well as, according to them, the need to finance their energy transition to pollute less.
Lower prices while increasing margins
This is the justification put forward by the association of large industrialists (Ilec), to explain its reluctance to reopen negotiations with distributors. A good argument, but far from being the only one, according to Eric Pichet, professor of finance. “The idea for the agri-food industries is to reconstitute their margin rate which had tended to fall for twenty years. They put this forward because it is in tune with the times: to say ‘if it is for the energy transition’, it’s for a good cause, whereas the argument ‘we want to increase our margins’ is not very popular.”
According to McKinsey, manufacturers have reduced their margins less than distributors. But Eric Pichet affirms it: whatever happens, they will never be losers. “They will be able to lower prices while increasing their margins, that’s the trick. If all the raw materials drop by 10%, they will be able to lower their prices by 5% while increasing their margins by 5%.”
A risky game. Last month, System U pulled all Pepsi products from its shelves, despite their notoriety due to a price disagreement.
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