Of the distributors and their suppliers, who accuse each other of profiting from inflation in France, who took the most from their margins to compensate for the price increase? Distributors, answers the consulting firm McKinsey, in its annual report on the state of the distribution sector in Europe.
The food brands studied by the firm (Carrefour, Casino, Migros, Ahold Delhaize, etc.) experienced the sharpest fall in their margins in five years last year. In total, compared to turnover, their Ebitda (earnings before tax, interest and amortization) fell by 1 percentage point between 2019 and 2022, compared to 0.8 point for their largest suppliers (Coca-Cola, Nestlé, Pepsi…).
For both distributors and manufacturers, inflation has made costs more expensive: energy is more expensive, as is transport or payroll. In 2022 and at the start of the year, distributors are also suffering from the new consumption habits of their customers. The latter are particularly sensitive to product prices, and go more readily to discounters, which gain 1.4 points of market share. They buy less to compensate for the price increase, and move downmarket.
“We expect (distributor) margins to remain under pressure in 2023, at least in the first half, anticipates the report. If, in addition, governments were to introduce new regulations to limit the rise in food prices, this would put even more pressure on margins,” he continues. In France, this is already the case. The government has asked retailers to offer products at reduced prices as part of an “anti-inflation quarter” which expires on June 15. Some, like Système U, market products at cost prices in this context. Others, like Carrefour, have blocked the price for three months. In total, the average price of the selected products is down 5%, assures Olivia Grégoire, the Minister Delegate for SMEs. The latter does not refrain from renewing the system if inflation does not decrease quickly enough.
To finance these operations, some of the distributors take on their margins. “But in the medium and long term, we will be able to lower our prices because we will have made savings”, explains Thierry Cotillard, the new boss of the Mousquetaires (Intermarché, Netto, Bricorama…). The third French distributor launched the hunt for unnecessary costs. Carrefour announced, during its strategic plan, a new savings plan of 4 billion euros by 2026.
Above all, to lower costs, there is nothing like making economies of scale, notes McKinsey. The firm expects an acceleration of operations in this direction. The German Rewe has already announced that it will invest 5 billion euros by 2025 to expand its fleet, including through small acquisitions. In France, the big maneuvers have begun: suffering badly from inflation, Casino entered into exclusive negotiations with Teract to create a vertically integrated player, from production to sales.
