See how much the prices have gone up on the shelves?
Inflation will continue for at least the first six months of the year and should peak between April and June. In 2022, the increase in food prices in distribution in hypermarkets reached an average of 12%. The cheapest brands E. Leclerc, Hyper U and Lidl have not finished passing on all this growth to consumers. At E.Leclerc, we continue to take our margins so that sales do not fall. Last year, institutions, including the IMF, looked at me when they lowered their inflation forecasts “the roar of the market” because I was advertising higher rates. As distributors, we know three to four months in advance how prices will change through our buying centers.
Do you believe that inflation will reach 2.5% at the end of the year, like the government authorities?
Nope. Last year, they failed in their predictions for 2022. They base macroeconomic indices to allow for European comparisons. But these are too general indices to reflect the everyday prices paid by consumers.
When will prices drop?
Not a drop in sight. Unlike agricultural producers, our buyers are afraid of negotiating with non-transparent producers. Currently, they are asking us for a price increase between 12 and 30 percent. Our buyers are confused and clearly worried. After a year of inflation, they are again offering us exorbitant increases. Nestlé and Mars, the largest suppliers of dog and cat food, are demanding increases of 17-39%. Unilever wants 25% for mustard. Of course, the entire distribution will try to negotiate to spread these increases.
Our buyers are confused and clearly worried
Also read – Inflation: INSEE predicts 7% peak in early 2023
Leclerc is the champion of the lowest prices, but is it still valid?
Whatever the level of inflation, the social benefit of E. Leclerc is to serve the least expensive and purchasing power. But we don’t just sell at first price. In every market segment, from entry-level to premium products, we stay the course. Moreover, the offer must remain available in the largest number for the French to adhere to climate mobilization and therefore decarbonized products, which cost more to produce tomorrow.
How are you coping with competition from Lidl, Aldi and the new hard discounters?
In principle, I fear any new opponent, young, old or small. Our teams in stores are extremely reactive. We know that 18 million customers come to us and also take advantage of the best promotions from Lidl or Action.
Is your 140,000 workers the cheapest adjustment variable? The press wrote that they were dissatisfied with the fact that salaries were still at the minimum wage level in December…
This is an attempt to destabilize. I know of a few shops in Normandy or the East that have the strain. But E.Leclerc is an attractive employer brand. Last year we hired 2,700 people. This year, we aim to hire more than 1,600 people through the profit sharing system. We also gave many bonuses.
E. Leclerc’s social benefit is the cheapest
What do you think about the basket of 20 low-cost products offered by Olivia Grégoire?
All distributors are equipped to make matching baskets. We do not reject the idea of collective action, but since we have no knowledge of ongoing negotiations and the law prohibits us from selling at a loss, it is difficult to imagine fixed prices. We are faced with a contradictory command. We are being asked to lower prices for the poor, while at the same time we are being asked to increase those products to meet the wages of farmers. Arbitration is the work of state authorities!
Is it a good idea to reduce VAT on basic necessities like in Spain?
Why not. But it is a loss to public finances when the law can encourage us to sell at lower prices by removing minimum margins on food and giving us positive support in negotiations. What do farmers really get for the price of a bar of Nestlé chocolate, Evian or a bottle of Coke in a time of inflation, especially in the face of hyper-powerful industry lobbies entering parliament?
Also read – Towards an anti-inflationary basket? Olivia Grégoire is asking to sell 20 everyday items at low prices
What about a price freeze?
This is the lid on the boiling water. We are facing price pressure, it does not hold. Moreover, let’s be pragmatic: who decides to block, how much and under what conditions? This means knowing the reactivity of each market. The desire to work with distribution is not fulfilled by the recent discussions in the Parliament.
What are the best anti-inflationary measures in France and Europe so far?
The tariff shield for energy prices was a good measure. In France, we have generally been better at managing the impact of inflation than our European neighbours. Since the Covid crisis, we have been lucky to have a focused Economy Minister “whatever it takes”. Today, everyone understands that the coffers are empty. Each tries to transfer their accounts to the other. The company itself saw its operating costs skyrocket. At Leclerc, we take our margins – our net margin averages 2.5%.
The tariff shield for energy prices was a good measure
On Wednesday, you opposed the bill brought by Frédéric Descrozaille, which was amended …
It was the entire cast that mobilized and performed well. Bercy reported his observations. The rapporteur did not retain his original option, which would have empowered producers to charge excessively high prices. We are all sent back to back. He envisioned two years of probation.
Also read – Inflation: INSEE confirms 5.2% growth in 2022
France has sanctioned your delay in the trade negotiations of your joint purchasing center with Rewe of Germany. Still struggling with this…
E. Leclerc has joined European partners. Like other companies in all economic sectors. It is interesting that the Administration and politicians often make the argument of the multinational companies that are not headquartered in France and that they make such alliances! This clearly reflects the French elite’s distrust of traders. Europe is also created to benefit consumers so they can enjoy the best prices in Europe.
How has French consumption evolved over twenty years?
The French have matured and managed their consumption, whatever the dangers. Leclerc centers were created during the black market era. In the 1960s, Carrefour invented the hypermarket, which allowed French food producers to flourish. For five years, we have been moving towards a higher quality product model. In the age of Covid, consumers want to eat good local and organic food without being hit by the price level, despite the fact that they are over-snacking and have reduced purchasing power. This demand forces us to review our recipes. We are now concerned with the composition of the products as well as the price. I also note that if they continue to be sensitive to brands, they buy labels less than before.