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Belgian supermarkets facing price increases for top brands
Supermarkets are expecting to have to raise prices on top brands such as Nutella, Lipton and Coca-Cola following annual price negotiations with major manufacturers, which grocery chains have described as “historically difficult”.
Major manufacturers cite inflation and an increase in costs in demands for more money, De Morgen reports.
The so-called "A brands" are more expensive than supermarket chains' own brands, but indispensable because of their popularity with customers.
Each year, supermarkets and producers sit down to hammer out agreements for volume and cost, with the grocery stores wanting the lowest possible price in order to pass down savings they can advertise to consumers, and producers wanting a price that allows them to take home a profit after production costs.
“Historically, the negotiations have never been so difficult,” said Roel Dekelver of Delhaize. Hanne Poppe of Colruyt agreed that this time the talks are “very tough”, and discount stores Lidl and Aldi echoed the sentiment.
The supermarkets suspect that A-brand manufacturers are using inflation as an excuse to overcharge, but costs for food production have long been rising. In December 2020, the federation of the Belgian food industry (Fevia) warned that the food sector was headed for a “historically low profitability of 2.6%,” and that consumers would have to shoulder part of the increasing production cost burden.
An explosion in the costs of natural gas (which rose by 411%), container transport (up by 144%) and food raw materials (up 32%) has driven up expenses for many food companies. Unilever, producer of brands such as Dove, Lipton and Cif, has already said it would have to raise its prices in order to simply break even.
But supermarkets say well-known giants the likes of Nestlé, Unilever, Procter & Gamble and PepsiCo are powerful conglomerates that operate on an international scale, and want to take advantage of inflation to charge prices higher than that inflation can justify.
“Costs are rising throughout the logistics chain, which results in a series of rate increases for suppliers,” Colruyt’s Poppe conceded. “But we see large and inexplicable differences between producers of similar products.”
“What will happen to prices if energy and raw materials become cheaper? We want to make clear agreements on this too. That is why the negotiations are tougher this year than in previous years and they also take more time.”
Delhaize’s Dekelver said that some of the increased costs producers cite have already proven to be impermanent.
“The suppliers come up with their tables of the increased costs in the past months,” Dekelver said. “But they extrapolate this to the rest of the coming year, while some costs have already fallen. So some come up with unrealistic contracts.”
Some supermarkets are prepared to boycott bigger brands if suitable agreements can’t be reached, as Colruyt did at the end of last year when it removed the small jars of Nutella from their shelves after the producer demanded price increases.
Delhaize carries 7,000 private brands in the total assortment of over 18,000 products (38%).
“We need each other,” said Dekelver. “Consumers want a certain continuity in their choice. At the same time, we have to remain competitive. That means that producers must remain relevant with their products. Price is important here.