Price increases are coming to Swiss supermarket customers. It is up to the major distributors to ensure that these are not too high.
Purchasing is becoming more expensive – but by how much?
The war in the Ukraine will make itself felt at the Swiss tills. Even the rather reserved Migros boss Fabrice Zumbrunnen spoke at the annual press conference of sometimes dramatic cost increases, which not only Migros but all retailers are facing.
From wheat to packaging material to energy: the Ukraine war has once again caused prices to surge. The fact that the world has become more expensive can no longer be argued away. The only question now is: Who will foot the bill for this?
struggle for burden sharing
In principle, various groups can be considered for this – and the distribution battles have already begun. The farmers do not want to be left with the higher production costs. They demand better purchase prices – or, in the usual manner, would like the taxpayer to pay part of the bill by means of higher subsidies.
Food processors such as Nestlé, Kellogg’s and Emmi, on the other hand, would prefer to pass the entire cost increase on to retailers. And for the supermarket operators, it would basically be easiest if they could add everything to the shop prices. In the end, the price surge threatens to be borne entirely by consumers.
Major distributors have leeway
It shouldn’t come to that. Higher prices reflect scarcity. They are a signal to all actors in the long food value chain, from field to fork, to adapt.
This also applies to the Swiss retailers – and above all to the two major distributors Migros and Coop, which dominate the local market like no other country in Europe.
The big distributors don’t like to hear it and deny it. But competition in the food trade is less intense in Switzerland than in neighboring countries such as Austria and Germany. This is reflected not only in a smaller variety of providers and in more concentrated market shares. In comparison, Migros and Coop can also afford a more generous “cost block” than the supermarket chains in neighboring countries. It’s a block of costs that, by the way, is paid for by the customers.
expensive structures
Migros is an example of this. The company management speaks a lot about efficiency – and in fact Migros has made progress in its operational processes in recent years and has therefore been able to tend to lower prices in the supermarkets.
But the big question of efficiency is not dared to be addressed in the Migros group. It is the fact that Migros continues to afford an opulent structure with ten independent regional cooperatives, each with its own administration and, in some cases, its own purchasing and IT systems. It is difficult to explain what this structure is supposed to bring to consumers in a small market like Switzerland.
Competitor Coop did a better job decades ago by centralizing and streamlining the organization. But even with this large cooperative, industry observers suspect that there is still room to focus on the essentials.
Focus on prices
Migros and Coop see part of their raison d’être in offering Swiss consumers good goods at the lowest possible prices. For a long time it seemed as if the price aspect had slipped a bit out of focus. The wholesalers were then woken up by the market entry of the discounters Aldi and Lidl more than ten years ago.
Now it’s time for Migros and Coop to prove themselves again. Food prices in Switzerland are already high in international comparison. To ensure that the price hike that is now foreseeable for Swiss consumers does not turn out to be too great, the major distributors should tighten their own belts.