The world's biggest packaged food maker Nestle and dairy giant Danone rely on France for revenue more than any other country in Western Europe, raising the stakes in price negotiations due to begin there next month.
France has long outstripped Germany, Italy, Spain and others
as the European Union's biggest market for groceries by supermarket revenue,
according to research firm IBISWorld.
But with a view to securing price cuts by mid-January, the
French government is bringing forward annual price negotiations between
retailers and their suppliers to start by mid-October.
Retailers like Carrefour have accused global consumer goods
makers including Nestle, Unilever and Pepsico of not "co-operating".
Speaking on Sunday night, French President Emmanuel Macron also
criticised the companies for maintaining high prices despite a decline in
inflation.
"Price freezing doesn't work," he said. We must
"put everyone around the table, and find an agreement on margins".
Carrefour, which has pricing power as France's No.2
supermarket operator, last week slapped "shrinkflation" labels on
products that are getting smaller with no reduction in price.
Data compiled for Reuters by Bernstein shows France
accounted for an estimated 8% of Activia yogurt-maker Danone's total reported
sales in 2022, and nearly 4% of Nestle's annual sales. In both cases, the
United Kingdom came second.
Unilever, with more than 400 brands including Dove soap and
Knorr stock cubes, counts France its third biggest Western European market at
2.2% of annual sales, after the UK and Germany.
Danone will be feeling some of the greatest pressure to
lower prices, said Bernstein analyst Bruno Monteyne.
"Its products are a lot more commoditised - yogurt is
yogurt and there are private label alternatives," he said.
"(Nestle's) Nespresso is not as easy to switch."
Retailers will say to those in a weaker position, "you
need me more than I need you", he added.
Nestle and Unilever declined to comment and Danone did not
respond to a request for comment.
Laurent Cenatiempo, Competition and Legal Affairs Manager at
European Brands Association AIM, said consumer goods groups would fear retailer
retaliation.
"What matters is bargaining power and the fact that big
brands need to be on major retailers' shelves...Unilever, Coca-Cola, all of
them have their hands tied because the retailers' market shares are
indispensable."
Representatives of the food industry, speaking to French
lawmakers on Wednesday, argued that production costs remain high after two
years of sky-rocketing input, supply chain and labour costs, with manufacturers
absorbing a significant part of the inflationary shock themselves.
But retailers say cost pressures are easing now while
investors have voiced concerns that rising prices will alienate shoppers and
hit sales volumes.
Supermarket groups in France could demand price cuts of
2%-5% from food manufacturers in the negotiations, the head of retailer Les
Mousquetaires Thierry Cotillard said on Wednesday.
There could also be ramifications elsewhere in Europe
because grocers are part of buying alliances, industry experts told Reuters
last week.
"Carrefour is negotiating on an international
basis," Laurent Thoumine, Europe lead for consultancy Accenture's retail
industry practice, said.
"Consumer goods companies that are not collaborating
the right way to optimise price are going to face some difficulties." -Reuters