Large retailers are strangling farmers
“Large distribution is strangling farmers”. What about it? The Pilgrim deciphers the subject for you.
- Every year, the Observatory of price formation and margins calculates the gross margins on the purchasing cost, department by department. In 2021, for all fresh food sections, French distributors (E. Leclerc, Carrefour, Les Mousquetaires, etc.) generated an average margin of 29.8%. In detail: 24.3% for dairy products, 56% in bakeries, 12.7% on a seasonal basket of vegetables… These are gross margins, that is to say the difference between the price of the product in radius and that from which it was purchased from the supplier (farmer, industrial group, SME) via a purchasing center. To know the real profit of the brands, you must subtract all their expenses (salaries, rents, energy, etc.). After taxes, the net rate stands at 1.6%, as elsewhere in Europe.
- Annual negotiations set prices sales between large retailers and suppliers. A crucial moment for 17,500 businesses – from small sausage producers to Lactalis – and therefore for 490,000 farmers. The strangulation denounced by the agricultural world often occurs here, due to the unbalanced nature of these relationships. Eight major brands dominate 90% of the market. The relationship between farmers and agribusiness is almost as disproportionate. In 2021, 76.3% of milk collection was carried out by only 28 collectors, reveals the Court of Auditors.
- The Egalim laws, voted in 2018 and 2021, seek to reverse this balance of power. Thus, they cap promotions and force large retailers to resell food products at least 10% more than their purchase price. During the standoff between brands and manufacturers, they make the part of the price linked to the cost of agricultural raw materials non-negotiable. But large retailers can free themselves from these constraints by using European purchasing centers, which make it possible to negotiate the price of products outside French legislation.
- Gabriel Attal announced a text of law, in the summer, to strengthen controls and the weight of farmers in negotiations. He wants the establishment of a European Egalim. Would it be enough to increase agricultural income? Large-scale distribution only captures 45% of the products of French farms. The rest goes through out-of-home catering, food trade or export.