A surprising deflation
Although the fall in raw material and energy prices played a determining role, it is not the only cause of this food deflation. “ The 0.3% decline observed in April testifies to an unexpected change of direction, which no one had predicted, even among specialists », Indicates Emily Mayer from Circana at our colleagues at Le Figaro. The end of price negotiations between distributors and producers at the end of January was also crucial. The agri-food giants have mostly agreed to moderate price increases, with average increases of 1%, well below forecasts..
The implications of the Descrozaille law
The Descrozaille law (EGalim 3), in force since the beginning of March, also plays a significant role. By limiting promotions, it indirectly forced manufacturers not to increase their prices excessively.. “ This law probably avoided excessive increases that would have been passed on to consumers », analyzes Mayer.
The fierce food price war
Exacerbated competition between food brands is the main driver of the observed drop in prices. The fear of losing market share in an environment where consumers are increasingly price sensitive pushes distributors to contain, or even reduce, their margins. “ Distributors are extremely cautious and closely monitor the actions of their competitors to adjust their prices accordingly », Confides an expert in the sector. This mutual monitoring slows down potential increases and sometimes leads to targeted decreases.
Customer Retention Strategies
“ What is happening now is a very calculated ballet of price reductions and adjustments, where every penny counts », adds the expert. Food brands, such as market leader Leclerc, are implementing aggressive strategies to maintain or increase their customer base. “ Leclerc has used its ability to offer competitive prices to clearly differentiate itself from its rivals, now holding 23.5% of the market », reveals Jean-Philippe André de l’Ania.
Distributors, such as Intermarché and Carrefour, are not left out. They are multiplying initiatives to avoid being left behind, going so far as to support certain cost increases themselves to avoid passing them on to the consumer. “ We have chosen not to pass on price increases to preserve the purchasing power of our customers. », Explains an Intermarché representative, clearly illustrating the current tension on prices.
Continuous monitoring of price movements by distributors and manufacturers suggests that this downward trend could continue, subject to changes in upstream costs and the strategic choices of players in the sector.
