Paris, Oct 15 - French supermarket prices will rise at least 6 percent in 2008 if suppliers do not modify demands for increases and laws remain unchanged, Auchan, the country's fourth largest retail group, said on Monday.
Auchan Director of Food Purchasing Jean-Denis Deweine said, however, the privately held company had not yet agreed any price hikes and was waiting to see if parliament changes rules that govern its negotiations with suppliers.
"Normally by Oct. 15 we have agreed all our contracts for the next year. All 1,500 of them. This year we have done none ... At the moment we are seeking to postpone these increases until next year," he told a news conference.
Big food suppliers such as Danone and Lactalis have announced steep price increases for November and December, citing the rising cost of raw materials like milk.
Deweine said jam makers such as Materne were also seeking increases of 14 to 16 percent and brewers were demanding 4 to 8 percent extra for their beer.
Economists fear as a result French inflation -- which has remained moderate so far -- is poised to spike higher this winter.
Asked to specify the cumulative impact on food prices in 2008 of the suppliers' demands, assuming Auchan could not absorb the impact, Deweine said: "At the moment we are already at over 6 percent."
He said if the regulatory framework for supermarkets were changed then prices might rise less, but they would increase nonetheless. "There's inflation. We have to say this," he said.
Under French law, supermarkets are not free to negotiate with suppliers directly about their retail prices and instead negotiate "soft" services such as shelf space and promotional campaigns for specific products.
The revenue they receive for these services allow them to make a profit even if they sell products at less than they pay for them. However, their margins are under pressure.
Auchan France President Arnaud Mulliez said the group's net profit this year in France would fall by more than 10 percent and noticed other groups, such as Carrefour, were also suffering in France.
The Auchan group as a whole, which has operations in 12 countries, made a profit of 746 million euros ($1.1 billion) in 2006 on sales of 35 billion euros. France accounted for 53 percent of sales.
France's new government is reviewing the legal framework for supermarkets, amid concerns that consumer purchasing power is being squeezed by food and non-food price inflation.
Auchan and other supermarket groups want the rules scrapped so they can freely negotiate prices with suppliers. Big suppliers want them maintained as it protects their pricing power.
Mulliez said Auchan also wanted the government to take up other recommendations in a report due to be presented on Monday. These include allowing hypermarkets to open on Sundays and changing planning rules to make it easier to build new stores.