Illustration, cabbage from a fruit and vegetable section in a large area. – POUZET / SIPA
- Once again this year, the Agricultural Show coincides with the end of the annual commercial negotiations between distributors and food manufacturers., who set the contracts – and therefore the prices – between the two parties for the coming year.
- These negotiations have been closely monitored since November 1, 2018, and the promulgation of the Egalim law. It aims to ensure a decent income for farmers, by injecting more ethics into these annual discussions.
- But does it work? The Egalim law resulted in slight inflation in the shelves in 2019, thus creating additional value. “700 million euros,” estimates the FNSEA, which wonders where the money went.
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What announcements will the Agricultural centre, who opens this Saturday? As much as Emmanuel Macron’s remarks, who will be going there for the opening, the announcements that the mass retail and agrifood industries could make will once again be scrutinized this year.
With an implicit question: spirit of Egalim law, are you there? From
General States of Food and promulgated on November 1, 2018, this law aims to establish fairer remuneration for farmers, in particular by instilling more ethics in the annual commercial negotiations between distributors and manufacturers. These talks determine the terms of the contracts between the two parties for the coming year. “Farmers are few around the table, begins Patrick Benezit, deputy secretary of the
FNSEA, first agricultural union. But we are concerned first and foremost, since the price that industrialists who process our products will get will then depend on our remuneration. “
“Put an end to certain retail practices”
Industrials and mass retailers must complete their negotiations by March 1, the closing day of the Agricultural Show. Last year, Lidl chose this agricultural high mass to announce with great pomp the agreement made with the Sodiaal dairy cooperative, revaluing the price of milk paid to producers *. This partnership punctuated a long list of agreements announced in previous weeks between manufacturers and distributors,
activating this same revaluation of the price of milk.
What will it be this year? Before talking about “negotiations”, Patrick Benezit dwells on another aspect of the Egalim law: “that of putting an end to certain practices of mass distribution which led, every year, to ever lower prices for consumers, but unsustainable for producers. In the past, very often, large-scale retailers had little margin on flagship brands, such as Coca-Cola, which were then used as appeal products, said the farmer. It caught up by making a larger margin on agricultural products, in particular by seeking to buy them at the lowest price. We have less pressure now. ” The resale threshold at a loss was raised to 10%. In other words, “a distributor is obliged to sell at least 10% more expensive a product that he bought”, explains Richard Panquiault, general manager of the
Institute for Liaison and Studies in Consumer Industries (Ilec), an association which brings together 80 companies manufacturing consumer products. In addition, a distributor can no longer promote more than 25% of the stock of a product he bought from a manufacturer, and the discount cannot exceed 34% of the original price.
Slight inflation on the shelves
Result: trade negotiations are now taking place in a more peaceful environment, note Jacques Creyssel, Director General of the Federation of Commerce and Distribution (FCD), that Richard Panquiault, industrial side. “Especially since the state put the package, at the end of the year, on administrative controls and sanctions, to ensure the proper application of these new rules,” added one to the FNSEA.
Another impact already noted from the Egalim law: a slight increase in prices on the shelves, “far from the soaring prices that Edouard Leclerc feared”, tackle Patrick Benezit. “In its 2019 balance sheet published on Monday, the research company IRI mentions 0.9% inflation on consumer goods overall [alimentation, hygiène, beauté et entretien] and fresh self-service products, explains Richard Panquiault. Inflation for food products is likely to be 1.2%. “
This slight increase comes after nearly five years of continuous drop in prices on the shelves, “a European phenomenon and not only French,” says Jacques Creyssel. The director general of FCD sees this as good news, “this inflation being the consequence of an increase in the prices paid to industrialists in 2019, especially for milk and pork. “
Dairy products, the tree that hides the forest
The speech is different on the side of the agricultural unions. “We estimate that this 0.9% inflation made it possible to generate 700 million euros in additional value in 2019,” says Patrick Benezit. We want to see the color. “We have to ask the manufacturers,” answers Jacques Creyssel, who represents the distributors. “A little easy,” retorts him on the side of industrialists. Richard Panquiault also has another question in mind: “The major part of the 700 million euros mentioned by the FNSEA was generated by the supervision of promotions and the raising of the resale threshold at a loss… What did the large distribution of this money? “
Dairy products would then be the tree that hides the forest, because in other agricultural sectors, purchase prices from manufacturers would have generally fallen. “In its assessment drawn up in April 2019, the trade negotiations observatory noted a 0.4% decrease in the purchase price of food products sold under the national brand [voir encadré] for the year 2019, “recalls Senator (Les Républicains) Daniel Gremillet,
chairman of the Senate Egalim law monitoring committee.
In turn, farmers have seen their incomes fall. This is the case of Alexandre Armel, breeder in the Allier and responsible for the meat section at the Rural coordination, other agricultural union. “In 2019, I was paid around 3.60 euros per kilo of carcass, compared to 3.85 euros in 2018,” he says. My production cost is 4.62 euros. Drought may partly explain this drop in prices **. But Alexandre Armiel especially deplores contracts signed between distributors and industrialists still as far from the production costs of farmers.
An Egalim law to improve?
However, this is the will displayed by the government with this Egalim law: the price construction reversal, starting no longer from the market, but much more from farmers’ production costs. “It is on this point that the dairy industry [des agriculteurs aux distributeurs, en passant par les industriels] has been ahead of the rest in the past three years, judge Richard Panquiault. It can already rely on more robust indicators in the construction of prices. But this inter-branch organization is also better structured and works with greater transparency, in particular on the issue of redistribution of value to farmers. “
Do the other sectors take the seed? This is what makes these past two weeks of trade negotiations – and therefore the Agriculture Show – interesting. “The dairy industry should confirm the upturns in prices seen last year, anticipates Richard Panquiault. We expect the same development in other sectors. “
Alexandre Armiel reminds us that there is an urgent need to increase the prices paid to farmers. ” The Future Common agricultural policy (CAP), which is to come into force around 2022, provides
a reduction in direct aid allocated to farmers ”.
Without waiting until 2022, the Egalim law monitoring group in the Senate, chaired by Daniel Gremillet, calls, in a bill tabled in mid-January, to correct the Egalim law on the points where it is already counterproductive. “This is the case with the supervision of promotions, which has weakened small agricultural sectors,” regrets the senator from the Vosges. Especially SMEs specializing in seasonal products, such as foie gras. On these commodities, the proportion of sales via promotions could be greater than 60% before the law. Drastically changing their sales model as quickly is not possible. Daniel Gremillet recommends that the framework does not apply to these seasonal products and that exemptions are possible, in other sectors, for SMEs in difficulty.
Should distributor brands be included in the Egalim law?
“There is a misunderstanding around the Egalim law”, points Danielle Gremillet. While he believes there is some good in this law, he also does not want to suggest that it alone will solve the problems of farm income. “The Egalim law only applies to part of a farmer’s income,” he says. Those related to the sale of its products in supermarkets in France, since this law does not apply in neighboring countries. But even in France, the scope is limited. The Egalim law only relates to processed agrifood products. In other words, a can of green beans, but not apples sold at the store. Above all, brands created and owned by retailers, such as “Marque Repère” for Leclerc, escape the Egalim law. “The hole in the racket is important since these private labels (private label) are an important distribution channel for agrifood products, ”confirms Patrick Benezit, deputy secretary of the FNSEA.
This is another flaw noted by Daniel Gremillet: “Escaping from the Egalim law, the price of products under private label dropped on the shelves in 2019, so much so that they gained market share for the first time since 2012, according to the Nielsen Institute. ” The risk ? That the price war, which was once waged on national brands, is now moving on private labels. Hence the need to include these private labels in the Egalim law. “The question arises,” says Daniel Gremillet. Patrick Benezit, at FNSEA, and Richard Panquiault, at Ilec, are in favor. As for distributors, Jacques Creyssel opposes it: “These are products produced on demand which are subject to tenders and not to annual negotiations”.
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