Is it justified to increase the prices of food for animals?
If kibble manufacturers accept increases in raw material and energy costs, the desire to keep margins on these products at the same level may explain the increase in prices of these products.
“I don’t understand why these products have increased so much…” On BFMTV this Monday, December 5, Michel-Edouard Leclerc admitted his confusion about the prices that animal feed manufacturers are offering him. On the A4 sheet he takes from the TV shows to the radio studios, you can read a list of his most important suppliers with their percentage increases.
It is in the “petcare” box (animal food) that the numbers are the highest: +17% for Nestlé petcare, +39% for Mars petcare. This is not the increase expected in stores in 2023, but the increase desired by manufacturers and passed on to distributors as soon as trade negotiations, which are due to end on March 1, 2023, begin.
If E. Leclerc, Carrefour and other Intermarché try to limit growth, the price for the consumer could still be inflated by 20-30% in 2022, after an already 13% increase, according to consumer expert Olivier Dauvers. Iri company. From 2022 to March 2023, the increase could be between 35 and 45% for animal feed.
Energy intensive manufacturing process
Are these increases justified by increased costs?
Some small producers recognize price increases, but in these proportions. This is the work of Matthieu Wincker, who in 2015 founded Ultra Premium Direct, a company that manufactures and sells direct animal feed products.
“We have an increase in the price of raw materials such as cereals and especially poultry, as well as transport and energy, but we have limited the increase to 8% in 2022”, – recognizes the president of this start-up, which should reach 40 million euros. in circulation this year.
If he warns that there will be a further increase in prices of around 10% next year, we are still far from the prices offered by the two multinationals.
As for raw materials, examples include a 42% increase in poultry meat due to bird flu, an increase in the price of cereals used to make starch, as well as kibble-coated animal fat (+200% in two years). oil industry for biofuels.
In addition, the production process requires energy. Kibble production is called industrial extrusion. The ingredients must be mixed, put under a pressure of 30 bar, heated to 130°C, and the croquettes thus formed must be dried before being sprayed with oil.
“It is a process that requires energy, but is also used in certain products for human consumption, such as certain aperitif products, soufflés…, Martin Vinker recognizes. On the other hand, our products contain very little water (about 8%) 40% in prepared meat dishes Water is one of the rare products that do not increase in price, so it helps to reduce the price increase.”
Two groups occupy 80% of the market
While production costs partially explain the expected price increases, the structure of the market is also in question.
Michel-Edouard Leclec thus evokes these duopolies in many price-fixing markets. It suggests that weak competition will tend to raise prices if they are careful not to talk about collusion.
About 80% of the animal feed market is held by two rural food giants. Switzerland’s Nestlé sells Friskies, Felix, Gourmet, One and Pro Plan products in specialty stores under the Purina umbrella brand. On the American Mars side, there are other behemoths of the department such as Whiskas, Royal Canin, Pedigree or Caesar.
International groups seeking to maintain operating margins despite rising costs. At Nestlé, for example, it remained at 17% in the third quarter despite rapid inflation. Mars Inc. is in turn a family-owned company of the same name, it is not required to publish its financial results. Despite this, the company announced a 50% increase in turnover for 2021, making it ahead of Coca-Cola in terms of sales for the first time. That’s enough to pay generous dividends to the Martian family, whose two members are among the 20 richest on the planet, according to Bloomberg.
To limit price increases, these companies could protect margins in values rather than percentages. This is a choice made by Ultra Premium Direct.
“Our margins remain the same, but have decreased as a percentage of turnover, Martin Vinker acknowledges. We made this effort to help consumers continue to feed their animals well.”