Price inflation in France following the implementation of the Egalim law

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Price inflation in France following the implementation of the Egalim law

Article Date: 08/02/2019 

 

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Stéphanie Lahad, Market Specialist France & Belgium, Bord Bia – Irish Food Board

As detailed in a recent food alert, the French Food law Egalim was voted on the 2nd of December and will be implemented as of 1st of February. One of the new constraints of the Egalim law, is that products must be sold to retailers at a minimum of 10% above the loss selling threshold.

The knock-on effect on food and beverages price inflation is projected to be on average 1.3% according to IRI, and up to 5 to 6% for leading brands. Intermarché has already announced that 5% of their food range would suffer price increase and Leclerc has indicated a 3% increase on almost 1,000 SKUs (source: Le Figaro).

To counter act this, retailers are exploring several routes:

The first one is to decrease their margins on their private label ranges which are traditionally higher. Leclerc, the market leader, has already announced a price decrease on 4,600 private label SKUs (source: Les Echos).

The other one is to use the loyalty card to decrease product prices: most retailers are trialling pay- back systems on their loyalty card. Carrefour for example has selected 200 SKUs that are mostly consumed by households with children and will deposit between 5 cents and €1.5 bonus for the purchase of those products on the loyalty card.

The subject is highly topical, considering that the start of the Yellow Jacket demonstrations was due to the oil price increase. One of the proposals emerging from the citizen debates currently taking place in France to ease those demonstrations is to decrease the VAT on products of basic necessities, thereby giving back purchasing power to the French people.

The French government is enforcing this new law for two years, after which it will review and amend accordingly.



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