the margins of manufacturers and distributors once again in the spotlight

Less than two weeks after the promulgation of the government emergency law bringing forward upcoming trade negotiations in hopes of containing inflation, four important consumer associations are putting the most sensitive topic in relations between distributors and agri-food manufacturers back at the top of the list: their margins. In an open letter addressed to the President of the Republic, foodwatch, Familles Rurales, UFC-Que Choisir and CLCV (Consommation Logement Cadre de Vie) denounce the responsibility of the agri-food industry and large retail brands in recording food inflation over the last two years.

By simultaneously launching a petition, they require the creation of a “obligation of full and immediate transparency regarding net margins per product” carried out by these actors, “concrete measures to prevent excessive margins on essential, healthy and sustainable food products” like this “the elimination of the minimum guaranteed margin of 10% for mass distribution (threshold for resale at a loss: SRP +10)”.

There gross margin of the agri-food industry at 48%

In two years, food inflation increased by more than 20%, by worsening the food insecurity situation in France, remember the associations. However, while “Manufacturers and mass retail brands have continued to blame each other for salty additions to grocery shopping carts in recent months,” Several studies seem to show that “both are benefiting from the crisis”.

In his Quarterly national accounts for the first quarter of 2023, published on May 31, INSEE reports in particular an increase in gross margin of the agri-food industry of 28 to 48% between the end of 2021 and the 2nd quarter of 2023: “a historic level that suggests that it is not a simple matter of catching up with previous years”.

As for mass distribution, the numbers, although imprecise,Food price and margin formation observatory (OFPM) “reveal that mass distribution increased its margins in 2022 in essential products such as dairy products (milk, certain cheeses), pasta, fruits and vegetables”, while gaining market share cheaper private label products. “In 2021, it was mainly thanks to profits from the fruit and vegetables section (+247 million euros after tax) that large retailers covered the losses in their bakery/pastry section (-65 million euros)”, denounces Familles Rurales.

Large distribution also applies since 2019, a Resale Loss Limit (SRP) of +10%. Instituted by the Egalim law to guarantee fair remuneration for producers, it increased families’ food budgets by 1.6 billion euros in two years, mainly benefiting distributors, according to UFC-Que Choisir.

Numbers disputed by manufacturers

Interviewee on TF1 and France 2 on September 24, 2023, Emmanuel Macron himself had promised the establishment of“an agreement on margin moderation” food, which he assured he would personally secure. But the project was quickly suspended by the government. During interviews with manufacturers, the Minister of Economy, Bruno Le Maire, expressed his desire to first obtain more accurate data on their margins.

The latter actually dispute the INSEE figures. The Institute for Liaison and Studies of Consumer Industries (Ilec) calculates, instead, that between January 1, 2022 and June 30, 2023, for a sample made up of more than half of the association’s members, costs increased by 2 billion, while revenue generated only increased by 1.4 billion.

“The industrialists have covered two thirds of their additional costs”, stated their general director, Richard Panquiault, before the Economic Affairs Committee of the National Assembly on September 20: “Their margin is not improving, their margin is to deteriorate.”

Later this year, most agri-food companies will begin their commercial negotiations with large retailers with increasing prices because their costs (agricultural raw materials, packaging, transport, wages, energy, etc.) “continue to increase”, even if “slower than last year, fortunately”, notified again on November 28 Jean-Philippe André, president of the National Association of Food Industries (Ania).

Despite this need for clarification, however, on October 6th, at the Livestock Summit, the Minister of Economy, Bruno Lemaire, limited himself to promising the preservation of agricultural producers’ margins. “according to Egalim laws”, through two missions entrusted to the General Inspectorate of Finance and the Observatory of Prices and Margins. And according to the government’s initial intentions, manufacturers’ and distributors’ margins should not be on the agenda of the government’s soon-to-be-launched mission on in-depth reform of trade negotiations.

“Bruno Le Maire and Olivia Grégoire are working with the OFPM to provide the French with more transparency at the margins of the different players” in the agri-food industry, explained the Ministry of Economy to a group of journalists on November 29th. , without however specifying the terms yet.

To read: Food prices: should trade negotiations be fundamentally reformed?

A bill before the deputies

The issue will, in any case, be on the agenda of the National Assembly on November 30th. Parliamentarians must, in fact, analyze a bill “which aims to combat inflation, regulating the margins of the agri-food industries, refining and mass distribution and establishing a minimum purchase price for agricultural raw materials”.,filed on October 17th by members of the LFI-Nupes group. Emptied of almost all its content by the Economic Affairs Committee, the project now contains only one article, allowing the OFPM to carry out “regular margin checks carried out by (…) producers, suppliers and distributors”, is for “publish periodic reports on the results of its controls, taking care to protect the confidential information of interested parties”.

The parliamentarians behind the proposal, however, hope to reintroduce the initial provisions through amendments, says deputy Aurélie Trouvé. In particular, they want to establish a mechanism to control the margins of the agri-food industries and mass distribution, which would only become operational when the prices paid by consumers deviate too much from those paid to agricultural producers, she explains. They also propose the removal of SRP+10.

To protect producers, they also suggest the annual setting, by the inter-professions of each sector, of a floor for the purchase price of agricultural raw materials from producers. The latter is, according to Aurélie Trouvé, the provision that would be most likely to be maintained. If it did not benefit consumers, it would at least “a great victory for the agricultural world, because the battle against inflation has so far been fought to its detriment”, believes the deputy.