While some manufacturers are making copious margins, the cost increases are real and are not all linked to the war in Ukraine. Explanations.
“Half the rises [de prix] requested are not transparent, they are suspicious. I would like the deputies […] open a commission of inquiry into the origins of inflationon what is happening on the price front.”
This Thursday on BFMTV, Michel-Edouard Leclerc in the midst of price negotiations with manufacturers took the French to witness by discrediting his suppliers. If the prices increase, it is not of its making, it is because the industrialists take advantage of the rise in production costs to inflate their margins.
And the boss of the Leclerc centers to support this assertion by pointing to the substantial margins of its suppliers as well as logistics companies.
“When you see all the suppliers coming in with freight bills up 15, 20, 30%, and especially container prices up 30%, and at the same time you see the transport come out of profits per billion last year, it is clear that it is not the unavailability of containers that has made what is rare is expensive”, he believes.
Since the end of the pandemic, shipowners have indeed made colossal profits. The profits of the French CMA CGM, world number 3 in the sector reached historic heights in the first quarter with 7.2 billion dollars earned. So much so that the giant has just promised that it would lower its prices “to support the purchasing power of the French”.
Nevertheless, if container prices have exploded in three years (x 7.5 in three years) it is indeed because of a widely documented global shortage and which is not expected to subside until next year.
Private labels are on the rise
This is also the case for most of the raw materials used in the manufacture of consumer products: packaging, paper, oil, agricultural products, inputs… Upset by the health crisis, supply chains have still not found their pre-crisis efficiency when demand has picked up.
France, very dependent on world trade, is not spared. Moreover, distributors and Michel-Edouard Leclerc know this. It is their own-brand products that have increased the most in the last year on the shelves.
In June, according to NielsenIQ, the average price increase was 4.4% in French supermarkets. Of which +8% for entry-level brands and +5.8% for distributor brands. National brands only increased by 3.69% on average. Which is logical, the weight of raw materials is greater in these brands Leclerc, Carrefour and other Casino.
To support his point, the boss of Leclerc also cites the example of products which would experience unjustified increases according to him.
“When you have manufacturers of cocoa-based chocolate products invoking Ukraine for a 15% tariff increase on confectionery, on chocolate bars, I’m talking about Nestlé, I’m talking about Mars, you have to not even messing around! We are on the other continent for chocolate and cocoa!”, mocked the distributor on BFMTV.
Yet cocoa prices swelled at the start of the year. And it’s not related to the war in Ukraine. Last December, the two largest producers in the world, Ghana and Côte d’Ivoire, suspended their deliveries to secure a floor selling price of 2,600 dollars per ton in order to better remunerate their farmers. Prices soared by nearly 20% until February before settling for a few weeks.
France rather spared
Regarding sunflowers, Michel-Edouard Leclerc is ironic about French brands that are mainly supplied in France and therefore a priori little affected by Ukrainian shortages. Except that here too, sunflower prices have soared with the strong global demand and the contraction in demand. The ton of sunflower went from 600 euros per ton last October to more than 1000 in April 2022, i.e. a surge of 63% on the Bordeaux market.
Finally, if prices rise in French supermarkets, the increase is even more substantial. Over one year, these prices only increased by 1.9% at the end of April according to NielsenIQ, while in Europe, increases can reach 5.8 or even more than 10% in Eastern countries. In short, if there are abuses on the part of manufacturers, they are global.
Abroad, distributors do not automatically pass on all price increases. In the United Kingdom, Tesco the “British Crossroads” announced on Thursday that it was withdrawing all products from the American brand Heinz. +40% for tomato soup, +11% for ketchup. Abusive increases according to the distributor.
“With household budgets under increasing pressure, we now have more responsibility than ever to ensure the best prices for customers, and will not pass unjustifiable price increases on to our customers,” said a spokesperson for the company. ‘taught.
More effective than a parliamentary inquiry?