New threat to prices in supermarkets. From March, a further significant increase is expected on the shelves. How big will it be and which products will be most affected? Answers from Emilie Mayer, consumer products expert at the Iri Institute.
Emilie Mayer
Expert in consumer products at the Iri Institute.
What is the magnitude of the price increase on consumer products?
Emilie Mayer: The rise is accelerating. On our panel which covers more than 100,000 references in 20,000 points of sale of large surfaces, we recorded a inflation of 12.6% in December 2022 (compared to December 2021), by 13.7% in January 2023 and it should pass the 14% mark in February. But with the annual price negotiations between manufacturers and distributors ending on February 28, we anticipate even greater price increases.
Should we fear a red month of March, with increases of up to 40%?
Discussions between manufacturers and distributors began on a very high basis with demands that can reach 40% increase on certain products whose prices have not been reassessed since last year. It’s the game of negotiation, but you won’t get a 40% increase all at once next month. It will be progressive throughout the spring because it is first the old stocks that will run out. Stores must be given time to apply the new prices. But it is certain that the month of March will mark a new level with average additional increases, according to our estimates, of between 4 and 7% gradually applied until June.
You will not have a 40% increase all at once next month
The challenge for distributors is to pass on acceptable increases to consumers, which do not risk causing a collapse in sales volumes. The retail sector was built on a logic of high volume to compensate for a low margin on each product sold. In our view, the rise in prices should subside this summer.
Which products are most affected by price increases?
All products whose percentage of agricultural material that composes it is high suffer from a sharp rise in prices, due to soaring prices of raw materials. On meat, milk, pasta, rice or eggs, price increases are around 20 30% over a year, for example. Products whose manufacture requires high energy consumption are also very affected with, again, increases of around 30% for handkerchiefs, paper towels and even toilet paper.
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The new price increase of 4 to 7% that we anticipate following the trade negotiations will affect all products, even those which until now had relatively little impact. It is explained by the salary increases granted since the beginning of the year, and above all by the continued rise in energy costs.
How do consumers arbitrate their spending?
The French are buying fewer fresh products, such as meat and fish, and they are turning away from organic, labeled or fair trade products which are more expensive. They are going downmarket to move more towards private labels. These are today 26% cheaper, on average, than the major national brands. But the French don’t hesitate to change brands to choose the one with the best image/price ratio, like Lidl or Leclerc for example.
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