In February, a first alarm sounded: inflation started trickling down to consumer goods, with a price increase of 0.52% compared to the same month of the previous year. March confirms the trend. Mainly, annual commercial negotiations between major distributors and manufacturerswhich was closed at the beginning of March, exacerbate the situation.
Indeed, the rise in food prices reached an annual low of 1.26% last month, according to the latest Nielsen IQ study. And the affected products are becoming more and more numerous: where only 68% of the categories were affected in February, it is now 81%, the specialist company underlines. Inflation is already above 8% for three products: pasta, pulses and frozen meat.
The prices of the main national brands are also rising
Last year’s weather conditions, such as the frost in April 2021, as well as the volatility of grain prices on the world market, which has been going on for months and exacerbated by the war in Ukraine, partly explain these increases.
But according to Nielsen IQ, the main cause of this acceleration in inflation is: †the implementation of new tariffs agreed upon by manufacturers and distributors during commercial negotiations” closed on 1 March Proof of this is that between March and February 2022, the prices of the main national brands targeted by these negotiations rose by 0.87%, while they were still deflationary a month ago, and that during the same period the inflation for all foods stood at 0.67%.
†The price of national brands is now rising in a similar way to private labels,” notes Nielsen IQ.
For the first time after years of deflation in fact, these negotiations resulted in an average increase of 3% in the tariffs paid to manufacturers† A result, however, insufficient for the latter, who demanded increases of up to 8%, necessary in their view to compensate for the increase, in 2021 and 2022, in all their production costs: agricultural raw materials, energy, packaging, logistics. †
An evolving situation
Due to the deteriorating inflationary context linked to the war in Ukraine, the government has asked both distributors and manufacturers to reconvene. He even managed to get them to sign a charter, guaranteeing on the one hand the reopening of these negotiations by the distributors, even if the legal conditions are not strictly observed, and on the other hand the transparency of the suppliers about the increases they claim.
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The situation is therefore still evolving, especially since according to the Ministry of Agriculture, only 10% of contracts were reopened two weeks ago and distributors have one month by law from sending their suppliers’ request for renegotiation to React.
Moreover, the high volatility of the international markets could quickly make these renegotiations obsolete, many observers fear. And the new frost that has just hit France could affect fruit prices next summer and canned goods in the fall.
“The forecasts change every day,” notes Immanuel walking sticksa pricing and distribution services expert at NielsenIQ France, who nevertheless raises the possibility of average consumer product inflation of 2% in April and 3.5-4% at the end of the year.
Fraction cases are on the rise
What is certain is that this uncertainty is already prompting some French people to… †so-called precautionary purchases with a greater preservation effect than usual”, that increase sales of certain products and sometimes lead to stockouts, notes Nielsen IQ.
During the last three weeks of March, sales of basic necessities rose sharply, in value due to inflation, but also in volume, despite a gradual slowdown in this trend. This is particularly the case for oils, flours and pasta, for which mass distribution shortages, excluding discounters, increased by +37%, +26% and +21% respectively between February 21 and March 27, 2022.
lHowever, professionals want to have peace of mind about short-term stocks.
“In France today there is no shortage for daily consumption and that will not be until the summer,” said the chairman of the strategic committee E.Leclerc, Michel-Edouard Leclerc, quoted by AFP on Sunday on BFMTV. “Pasta is here. For sunflower oil, our stocks run until June,” he said.