The rise in costs is eating the margins of supermarkets in Spain. Thus, electricity has risen 282%; gas has done so by 395%; agricultural raw material 170% and glass, cardboard or plastic packaging up to 120% on average.
Food distribution is lowering its margins to curb its prices in the face of rising costs, of up to three digits, in energy or basic raw materials. Between July 2021 and July 2022, the CPI for Food and Beverages has grown at an average annual rate of 6.7%, compared to an average annual rate in the Industrial Price Index (IPRI) for Food in the same period of 12.8%.
The latest data published by the Ministry of Agriculture, only available until May, also confirm this cushioning effect. Specifically, taking January 2021 as a reference, the prices received at origin have risen 33 points and in the food industry they have risen 22 points, while the CPI for food paid by consumers has risen 12 points.
Anged, the employers’ association of large stores, which brings together companies such as Carrefour, Alcampo, Eroski or El Corte Inglés, explains in light of these data that “the root of the inflation problem is none other than the disproportionate increase in the cost of energy, fuel and raw materials”.
And examples are not lacking. Electricity in wholesale markets has climbed 282% from January 2021 to July 2022 and gas has done so by 395%. And in this period, such important components for primary production or the food industry as cereals have become more than 170% more expensive. And not only that. Glass, cardboard or plastic for packaging rebounded by around 120%.
“Transferred to the CPI, the latest available data for July shows how the energy components explain more than 40% of the increase in prices. Fuels have accelerated their price increase by 95.7%, gas reaches rates of 204% and electricity is close to to 50%, after the peak of March”, they explain from the employers of large distribution.
Up to 43 food categories grew in August more than the general index
The annual variation rate of the CPI for the month of August stood at 10.5%, three tenths below that registered in July, while that of food stood at 13.8%, three more.
However, the manufacturer’s food brands raised their prices in the month of July by an average of 7.6%, almost half that of inflation, while the distribution brand did so in the same period by 13.8%. , in line with the general increase, according to data from the consulting firm NielsenQ.
Up to 43 food categories grew in August more than the general index and four categories, considered basic within the shopping basket, did so above two digits. Specifically, flour and other cereals did so by 39%; pasta 30.3%; whole milk 26% and eggs 22.4%.
white marks grow
Despite the fact that in July the private or distributor brand (MDD) raised its prices more than the manufacturer’s (MDF), food inflation is leading many consumers to increasingly choose to buy more private label products.
Thus, according to NielsenQ, the distributor’s brand in food remains strong in the market and in July 2022. It is thus close to the share of the manufacturer’s brand, which is 51.2%.
Spanish consumers increased their spending on white brands in July by 16.8% and 2.7% in volume, compared to the 8.5% increase in spending on manufacturer brands, which registered a contraction in demand of 0 .9%.
Patricia Daimiel, general director of NielsenQ for southern Europe, considers that “everything points to a scenario of growth in average prices, which will be followed by more contained volume figures. We will have to be attentive to how the inflation, which has been above 10% for three months, to household disposable income and how we readjust our purchasing habits, mainly with distribution brands, price controls and promotions”.
Faced with the rise in the CPI, households have been readjusting their budget and purchasing preferences for months. There is thus a substitution effect between products and brands, a greater attention to prices and promotions and a significant variation in consumption habits.
wide assortment
According to Anged, “the competitive dynamics of large retailers and their wide range of products and offers contribute precisely to this adjustment of the household budget. According to the latest data available from the Consumer Panel of the Ministry of Agriculture, Fisheries and Food, growth of the average price paid by consumers (value of purchases made) has been below the CPI for food for five consecutive quarters”.
For its part, a report prepared by Gelt, a consumer purchase data platform in Spain, points in the same direction as NielsenQ when it refers to . Said study indicates that white brands raised their prices from January to mid-April eight percentage points more than those of the manufacturer. The global calculation of price increases from January to mid-April was 10% in the case of manufacturer brands, compared to 18% for white brands.
The underlying problem is that, in the midst of an unprecedented energy crisis, Public Administrations are accelerating the spiral of costs in sectors such as commerce. Thus, in the last year, companies have been affected by some thirty measures that make their costs more expensive in different ways: more taxes and contributions, new obligations for the exercise of their activity, important investment requirements to adapt their business to the new regulation and high transaction costs caused by legislative complexity and fragmentation.
Regulatory burden
The Spanish administration has also proposed to advance faster and with a greater regulatory burden than that contained in the European directives themselves on issues such as value chains, labelling, circular economy, plastics, waste or energy transition. Even in a fragmented way between autonomous communities.
Anged, and the rest of the employers in the sector, such as Asedas or Aces, claim, for all this, a reduction in VAT. “In fiscal matters, progress can be made in measures with a more direct impact on the disposable income of households, such as the reduction of VAT on food or the deflation of personal income tax.” ensure the aforementioned associations. Anged, Asedas and Aces have made it very clear to the Minister of Labor and Vice President of the Government, Yolanda Díaz, that they do not share her idea of capping prices, a measure that they consider illegal.
“Distribution companies are already working to offer an affordable shopping basket and the competitive dynamics of the sector have helped to cushion the sharp rise in energy and raw materials,” they say. In his opinion, “the agreement is unfeasible and counterproductive because it starts from an erroneous diagnosis of price formation in the chain, because it would be ineffective and because the experience in other countries has been unsuccessful”
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