by Richa Naidu
LONDON (Reuters) – Trade negotiations between large industrial groups and retail brands could have serious consequences for Nestlé and Danone, whose revenues depend on France more than any other country in Western Europe.
France has long been the largest food market in the European Union in terms of supermarket revenue, according to research firm IBISWorld.
Faced with high inflation in food prices, the French government wants to advance price negotiations between distributors and industrial groups. These, which are usually held between December and March, are due to start in mid-October in the hope of obtaining price reductions by mid-January.
Sunday evening, President Emmanuel Macron attacked the large food industrial groups which maintain high prices despite a decline in inflation, highlighting the need to find a “moderation agreement” on the margins.
“Price freezing doesn’t work,” he said. We must “put everyone around the table, and find an agreement on the margins”.
According to data compiled by Bernstein for Reuters, France represented around 8% of Danone’s turnover in 2022, and almost 4% for Nestlé. The United Kingdom comes second for both groups.
According to Bernstein analyst Bruno Monteyne, Danone will face the greatest pressure to lower its prices. The French manufacturer’s products, such as yogurts, are more easily substituted by cheaper brands than, for example, Nespresso coffee from Nestlé, he points out.
In this way, distributors could find themselves in a position of strength.
An observation shared by Laurent Cenatiempo, head of competition and legal affairs at the European Brand Association (AIM), who notes that large producers, including Coca-Cola and Unilever, cannot do without the market shares that represent supermarket shelves.
Nestlé and Unilever declined to comment and Danone did not respond to a request for comment.
Heard by the National Assembly on Wednesday, representatives of the food industry argued that production costs remained high after skyrocketing for two years.
Distributors say that cost pressures are easing while investors are starting to worry about the impact of price increases on volumes and ultimately turnover.
Distribution groups operating supermarkets in France could demand price cuts of between 2% and 5% from food manufacturers during negotiations, Les Mousquetaires group boss Thierry Cotillard said on Wednesday.
(Report by Richa Naidu; Victor Goury-Laffont, edited by Blandine Hénault)
Copyright © 2023 Thomson Reuters
I have over 8 years of experience working in the news industry. I have worked as a reporter, editor, and now managing editor at 247 News Agency. I am responsible for the day-to-day operations of the news website and overseeing all of the content that is published. I also write a column for the website, covering mostly market news.
