“The worst is yet to come. Inflation is not done with the French. The cost of food could rise by more than 200 euros per person in France in 2022, credit insurance company Allianz Trade warned in a study published on Tuesday.
“Food distributor prices could rise by 8.2%, resulting in an increase in annual food spending of 224 euros per person this year, bringing the total to 2963 euros,” said Aurélien Duthoit, industry adviser at Allianz Trade.
Even stronger growth among our neighbors
However, compared to the rest of the Old Continent, the French will not be worse off: thus, the average increase in the food budget in the European Union will be 243 euros, and the Germans will even pay an additional 254 euros in 2022. . . .
A differential that is due, among other things, to “a very concentrated market structure in France, which gives distributors a significant financial surface and allows them to cover part of the increase in purchasing costs,” deciphers Aurelien Duthoit in AFP. “The synergy achieved by groups at the level of their purchasing centers” also helps to limit the impact of increased production costs on selling prices, he adds.
Estimates of food budget increases in 2022 are based on the assumption that distributors pass on to their selling prices 75% of the increase in prices they pay to producers in the agri-food sector. At present, however, less than half of these product price increases have passed on to consumers.
Indeed, “manufacturers in the European agri-food sector have increased their prices by 14% since the beginning of 2021”, while “food distributors, on the other hand, have increased their prices by only 6%,” Aurélien Duthoit specifies.
Very volatile environment
According to the credit insurer, the speed at which selling prices will match production prices remains “highly uncertain given the volatility of the current economic environment,” marked in particular by the war between Russia and Ukraine.
The conflict between the two major agricultural powers has already had very concrete implications for prices, with producers charging 53% more on oils and fats than in 2021. The cost of flour to distributors, meanwhile, jumped 28% and pasta prices jumped 19%. According to the latest INSEE data, inflation for the year rose by 4.8% in April, while food prices rose by 3.8%.
Threats to Financially Vulnerable Households
And growth, according to Allianz Trade, is not going to stop, as distributors who have come out of the two years of the pandemic “very profitable in terms of their turnover as well as their profits” should not support expenses that reduce their sales volumes by lower prices. Moreover, with advances in technology, sales pricing strategies are becoming more and more sophisticated.
As such, discounts given by distributors tend to be more selective than in the past, as they are tailored to each store or even each consumer. “For some, rising food prices will only affect their ability to save; for others, it may further undermine their ability to meet their basic needs,” concludes Allianz Trade. The warning was issued at a time when the government is preparing to amend the budget by the end of June, which, in particular, should lead to the distribution of the food check.