The next night, it does not change time, it changes price. On the 1st of February, the labels of the food products have swelled from a few cents or a euro. As a direct consequence of the law of supply, the retailers do not have the right to sell at cost price, the threshold of resale at a loss is increased by 10 %. However, approximately 20 % of the turnover of distributors so far was achieved with less than 10 % margin. “The inflationary effect would vary between 14 and 38 euros per year and per household,” according to the competition Authority. At Carrefour, the price increase will average 35 cents per product. “There are approximately 1,000 references that have been sold previously with margins very low, between 0% and 10%, as these are the products most bataillés,” explains Élodie Perthuisot, director of marketing and client Carrefour. At Intermarché, 5 % of the assortment will increases, which would correspond to an inflation of 0.8 % on the basket by 2019. Announced as the biggest loser of this inflation, Leclerc ensures control of the situation. “About 3000 products would have had to increase but, on the 1st of February, we will have managed to curb most of the rise. Remain 1000 products which will increase by 3 %, ” says Michel-Edouard Leclerc, chairman of Centres E. Leclerc.
At a time when the question of purchasing power is very sensitive, this increase is frightening brands. And even the government. “What I ask for large surfaces, it is to find a way to distribute the margins differently”, insisted Wednesday Didier Guillaume, minister of Agriculture. This is an increase of a few cents on a litre of gasoline, which triggered the crisis of the “yellow vests”, there is talk of increasing the price of the flagship products of cart racing.
To avoid the stroke of the brake, the brands have taken the lead. Carrefour poses as a defender of families and launches on the 1st of February a “Premium brands” over 200 products which will give back the money on the loyalty card. “We use the loyalty program Carrefour in order to restore the purchasing power of the consumer,” says Élodie Perthuisot. The commitments taken on with the agricultural activities are another part of the answer. Of course, the price will increase, but because the distributors are committed to remunerate better the dairy farmer or the farmer.
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In parallel, the price war moves on the field of retailers’ own brands (MDD). Margins are more important and products less comparable between brands. Leclerc announced to lower the price of the 4600 references to its Brand Mark in 2019, and promises that “as early as march, the game will once again become virtuous”.
“Our goal is that the game is zero-sum for the consumer. We will lower the prices on our brands, distributors, do promotions where you can still do it”
Intermarché in turn ensures drops on all of its own brands. “Our goal is that the game is zero-sum for the consumer. We will lower the prices on our brands, distributors, do promotions where you can still do it, hygiene-beauty and non-food, and strengthen the cagnottage with the loyalty card,” explains Thierry Cotillard, president of Intermarché. Worry the SMES who supply them. “The signs will increase their mass margins on the national brands, which will encourage them to promote these same brands to the shelves, to the detriment of SMES who are at risk of losing 4 % to 5 % in a year”, worry about Dominique Amirault, president of the Federation of enterprises and entrepreneurs of France (FEEF). “On the contrary, it is an opportunity for manufacturers of own-brand products, because the price gap with national brands is going to strengthen. This will generate more volumes for the MDD and the SMES that manufacture will be the big winners,” says Thierry Cotillard.
Jones also wants to reassure them. “The price reductions of the Brand Mark are financed by a margin decline. This represents several tens of millions of euros of losses from the margins to the Centres Leclerc. We would catch up with them if we keep our customers and if we increase the volumes,” says Michel-Edouard Leclerc. The big brands that the price rise would have the most to lose. “Last year, when prices increased by 1 %, volumes fell 1.7 %,” confirms Daniel Ducrocq, at Nielsen.
