As a result of difficult price discussions, an increasing number of shelves at Colruyt shores remain empty. The Belgian market leader has a lowest price guarantee to defend and is not hesitating to put pressure on A-brand manufacturers to maintain this.
Falling commodity prices
While Colruyt has ended its disagreement with AB InBev, which had led to Stella Artois and Jupiler disappearing from its shelves last week, the retailer is still fighting with other big brand manufacturers. Zwan and Knorr, two Unilever brands, were next to go missing from the shelves. The latest addition is Mars, whose Bounty, Mars, Snickers and Whiskas brands have gone missing. Colruyt confirms the ongoing conflicts, but does not want to say much more than that the negotiations will eventually lead to an agreement. As they do every year, the discounter adds.
The delistings at Colruyt are not entirely unexpected: observers had expected the next negotiation period to be very difficult. Last year, disputes arose over the hefty price increases that manufacturers wanted – and mostly succeeded – to pass on. Now food retailers demand that producers start dropping their prices again, as raw material prices on the world market are also falling again.
Shrinking margins
Brand manufacturers disagree, however: they point out that labour costs – especially in Belgium – have risen sharply, while energy, transport and packaging costs also remain high. Some raw materials, such as sugar, cocoa and oils, also remain expensive. According to food federation Fevia, the average margin in the food industry shrank to 2.8 %. However, the big listed groups have mostly managed to maintain their margins.
It is therefore not surprising that Colruyt, with its lowest price guarantee, is now taking the lead. They are not alone: sources in the sector say that negotiations are also going badly at Delhaize and Carrefour, among others. They too are demanding price cuts and additional conditions. Whether this will also lead to boycotts remains to be seen.
