Inflation: heading for a food price tsunami?
This week, Michel-Edouard Leclerc assured that “we are facing a wave of inflation and we are heading towards a tsunami after the wave that already exists”. A tsunami that will hit France in 2023, where inflation is less strong than in our neighbors, but the French feel it. Prices of food products increased by 11.8% in October.
Michel-Edouard Leclerc is known for not having his tongue in his pocket. The director of E. Leclerc centers, who was invited on BFMTV on Tuesday morning, sounded the alarm about the “tsunami of inflation” that, according to him, will overwhelm France in the coming weeks. “Inflation is not temporary. New negotiations around Christmas are in double digits,” he said, referring to future price negotiations between major retailers and food manufacturers.
“Today there is a new stage of negotiations that the law (Egalim, editor’s note) contane. We have price inquiries from all distribution groups. My employees tell me that there is no demand below a double-digit increase, “says Michel-Edouard Leclerc, who brought several examples of products for which the brands want a price increase. slightly more than, coffee more than 10%, pet food (animal feed, editor’s note) 41%, starches 10.83%, poultry 13% and paper [qui] 11% continues to grow,” said Michel-Edouard Leclerc, urging buyers to “go into battle mode.”
Arm wrestling between manufacturers and mass distribution
“Industrialists are busy with their work, but I want us to re-legitimize our right to compete with them. This applies not only to mass distribution, but also to canteens, central procurement for the administration, “explains Michel-Edouard Leclerc, who believes that mass distribution is limited by the Egalim law.
Since the start of the war in Ukraine, negotiations between the industrialists and the big division have been tense. Producers accuse hypermarkets of refusing to pay more for food products that are expensive to produce, or of increasing the prices shown on the counters when they refuse to pay more for these products. Distributors, in turn, believe that certain price increases are unreasonable. In September, Les Mousquetaires Intermarché group president Didier Duhaupand accused Danone of exploiting inflation to improve its margins with “unjustified” price increases (about 12% on water bottles).
This arm-wrestling takes place in the context of a trade war between different brands, each developing anti-inflation programs for their customers, between fixed prices on a certain number of distributor products, loyalty or voucher returns.
Finally, in addition to price increases, large retailers fear shortages of certain products, Système U’s CEO told JDD in late October. shortage rate from 2% to more than 10% – Dominique Schelcher said in Ouest-France that “normal products will be missing from the shelves for a few weeks to a few months”. And to explain, “according to the Agricultural Cooperative, which represents a third of the brands, many producers will soon be forced to choose varieties due to extremely high costs: farmers, for example, will decide to abandon birds in order to make a profit on grain.
The most expensive products, such as charcuterie and cheese, and the lowest-selling products will be overlooked by manufacturers facing an explosion in production costs, especially energy…
16.9% price increase for fresh produce
Over the year, according to the provisional estimate published by INSEE on October 28, consumer prices increased by 6.2% in October 2022, after +5.6% compared to the previous month. The year-on-year adjusted consumer price index should increase by +7.1% after +6.2% in September.
As for food products, we went from +9.9% price growth in September to +11.8% in October. In detail, fresh produce jumped from +11.3% in September to +16.9% in October; other food products increased from +9.6% to +11%.