Business

What is the leeway in the face of inflation?

Why are the prices rising?

It is a combination of several factors: energy and fuel are more expensive, as is the production of many processed foods. The processing of sugar beet or the drying of milk powder, for example, has seen their production costs rise due to the price of energy.

Agricultural commodities, especially grains, soya that feed certain animals, durum wheat from which pasta is made, maize, have also surged, both for fear of shortages caused by Russia’s invasion of Ukraine, but also because some producing countries are reluctant to export and some crops are not good.

Other items of expenditure have increased: large imports, with the price of containers; but also packaging, cardboard, aluminium, glass… Sometimes you have to change supplier from week to week, and not always under the same contractual conditions. The boss of milk giant Lactalis, Emmanuel Besnier, spoke of “a crisis in all production costs”, which is expected to rise by 15% by 2022.

Until ?

This explosive cocktail certainly seems to last several months. Emily Mayer, an expert in consumer products at the IRI Institute, expects an inflation of 5% “at the beginning of the summer”, and a phenomenon that “will disappear”. in April, it has already registered a 2.9% increase compared to the same month of the previous year, after 1.5% in March.

In “The Parisian”Dominique Schelcher, president of the Système U supermarkets, cited the example of Spain or Germany to estimate that inflation could rise to 10%, “mainly because of energy costs”.

The latter doesn’t seem to be going down. And manufacturers and major retailers have been strongly encouraged by the government to return to the negotiating table, the first because the annual negotiations, which closed on March 1, failed to take sufficient account of increases in production costs.

If the distributors bought more expensive agro-industrial products at the end of the negotiations, the prices would not fall on the shelves again before the summer.

What is the reaction of supermarkets?

In this context of fear of purchasing power – the main concern of the French according to opinion polls – the brands minimize price increases as much as they can with one goal: to retain or even win new customers, more and more attentive to their reception .

With much support from communication plans, they are also working on what sector specialist Olivier Dauvers calls their ‘price image’, ie the perception that customers have of their prices. Michel-Edouard Leclerc therefore announced an “anti-inflation shield” to compensate in vouchers in E.Leclerc stores for price increases from May 4 on a selection of 120 heavily consumed products.

The brands with the best ‘price image’, in particular E.Leclerc, Lidl or Aldi, are also the brands with the best economic performance. But the competition is also trying to “crush the prices” and publicize it.

What can the government do?

When Agriculture Minister Julien Denormandie has called for a reopening of discussions on agri-food prices in mid-March, the government is well aware of the problems posed by the rise in food prices.

It has already decided on expensive measures to help households and businesses, in particular gas price freezing (cost of 6.4 billion euros according to a latest estimate in mid-March), inflation compensation for the most modest (3.8 billion euros), a 15 cents discount on fuel (3 billion).

But during the campaign, Emmanuel Macron pledged to go further, especially through a food checkhelp for people who work a lot by car, or an increase in social minimums and old-age pensions.