How much will your package of pasta cost in three months? ? We hear a lot about increases in world prices for cereals but how, and when, will this translate into prices at the checkout ? These agrifood prices are decided during annual trade negotiations. Today, due to the Covid-19 epidemic, they are taking place by videoconference. There are sellers and buyers face to face. The sellers are the food manufacturers and the buyers, the distributors and in particular the supermarkets like Leclerc or Auchan.
For a long time, these negotiations were very opaque. Thirty years ago, say the oldest, salespeople had to travel to the headquarters of major brands: Casino in Saint-Etienne, Auchan in the North. Sometimes they had to wait in a cubicle, for several hours, sometimes in the dark or with the heating turned on. And when the negotiation started, little vexation, they realized that their chair was lower than that of the buyers.
From “cowboy methods“ comments in “off” the commercial director of a large brand, but which have evolved little, despite several successive laws. “It’s still always the balance of powerdeplores Serge Papin, the former president of System U. It’s a bit like the law of the strongest. These ‘negos’, which are destructive, weaken all the production devices, in particular the agricultural device.”
Concretely, each manufacturer such as Lustucru, Bonne Maman, or Danone must send its conditions of sale to supermarkets before December 1. Begins, then, a negotiation, which must imperatively end on March 1st. This therefore leaves four months to discuss the prices which are “always down“, says Olivier Lauriol.
Former buyer for large retailers, he is now at the head of the firm Arkose, which supports manufacturers in these negotiations. “We’ll start by saying, ‘I received your general price, last year I got 40% off the price so I bought your product at 60. In 2022, I received a price that increases because you have additional costs. If 2021 was on base 100, the 2022 rate is on base 105, but I still want to stay at 60’.”
These requests from distributors for the lowest price still exist despite the international context where everything is on fire. The dominant discourse among supermarket buyers remains that“a price is negotiable, whoever does not negotiate gets a bad deal.” These trade negotiations today are only “the expression of free competition and are therefore rather healthy”. Except that if we look more closely, the tussle is a little unbalanced because large retailers have formed themselves into purchasing groups: there are four of them today, which come and go depending on the year. The largest, which includes Carrefour, Cora and System U, weighs 34% of the market! Difficult in these conditions to get angry with someone who weighs so heavy.
However, there are laws to frame these negotiations which are governed by the law of modernization of the economy, of 2008. And because that was not enough, there were other laws. The most recent being Egalim, from the Estates General for Food, to ensure that farmers are no longer the big losers in these negotiations. “There was an urgent need for farmers to be able to live from their workdevelops Serge Papin who participated in the drafting of the law. So we put in place a system based on real, verifiable and non-negotiable production cost indicators. We’ll see what happens, but maybe the farmers will finally be able to live. They are today the weak links because they are not necessarily as well organized as the strong links”
“It is abnormal that agriculture is the adjustment variable of a price war.”
Serge Papinat franceinfo
If the farmers seem out of the woods, it is today the industrialists who are worried. If the law states that the price of the raw material can no longer be negotiated, it says nothing about the price of the processed part.
And as everything is on the rise, the manufacturers arrived at the negotiations in 2022 asking for a 6% increase, according to the National Association of Food Industries (Ania), which represents 15,000 food companies. Its president, Jean-Philippe André, does not want to be the collateral victim: “This negotiation on the agricultural part hides the fact that the other inputs, such as boxes, energy, wage bills, road transport, maritime freight, are absolutely not taken into account in the cost structure. , the global recovery is causing prices to explode on this part of the cost structure.”
An explosion that will have to be taken into account, except that old habits die hard. A low price in the supermarket, a baguette at 29 cents at Leclerc, attracts customers. It is even rumored that a central purchasing office, despite everything that has been said, has once again offered deflationary prices this year in the name of the sacrosanct defense of consumer purchasing power.