Paris, Feb 26 - French supermarkets hit back on Tuesday at claims retailers were conniving in pushing through big food price rises to consumers, with some saying they would stop stocking brands that had sought big increases.
Auchan's head of food purchasing, Jean Denis Deweine, told Reuters that it would stop selling Candia dairy products, among others, and said supermarket margins were under pressure because of supplier-driven food price increases. The issue of food price inflation has moved to the centre of France's political radar ahead of local elections next month after a consumer group claimed prices for dairy and cereal-based products had risen as much as 40 percent in recent weeks.
The government reacted on Monday by saying price surveillance measures would be stepped up to clarify to what extent increases were caused by higher commodity prices or due to increased profit margins for producers and retailers.
Auchan and rival Carrefour said the study by the National Consumers Institute published on Monday was one-sided because it was based on prices from supermarkets' Internet home-shopping websites and not in-store prices.
The average price increase of the 20 products mentioned in the study in Auchan stores was 13.2 percent between November and January. However, Auchan said the average price increase of all 24,000 products it stocked was 2.5 percent.
"If we have raised our prices 2.5 percent it's under the pressure of price increases from our suppliers. The 2.5 percent does not reflect the increase administered by suppliers, which is 7.4 percent," Deweine said.
Taking one example, he said the average increase made by Danone was 12 percent but Auchan had passed on only 7 to 8 percent to consumers. "The difference is the drop in our margin," he said.
A spokeswoman for Carrefour said there was a difference between prices in the study and those in Carrefour stores.
She said Candia baby milk rose by 25 percent, and not by the 48 percent mentioned in the study, and said the purchase price for Carrefour rose strongly. Barilla spaghetti rose by 26 percent in the stores not the 45 percent mentioned in the study and that was against a purchase price rise of 32.2 percent, she added.
The study did not put pressure on share prices and Carrefour rose 1.07 percent to 48.27 euros after a 10 percent decline this year, while Casino was up 0.55 percent at 76.42 euros.
The average operating margin in France of Auchan, Casino and Carrefour has dropped to 4.1 percent from 5.6 percent over the past four years, estimated Christian Devismes, analyst at CM-CIC Securities.
French supermarket bargaining power is constrained by price-setting rules designed to protect the margins of small and medium-sized suppliers.
The latest debate over prices comes ahead of a March 1 legal deadline for the two sides to agree their contracts for 2008.
Deweine said Auchan still had some "hot" negotiations pending with suppliers who "to our point of view have made exaggerated price increases that don't allow us to limit price increases just to the reality of higher commodity prices".
March 1 will also mark the start of partial reforms to the system adopted by parliament in December.
In recognition that the reform doesn't go very far, the government has already promised further liberalisation of price setting, and possibly of supermarket planning rules, this spring.
Deweine said he believed the supplier price increases were partly driven by anticipation of these legislative changes but supermarkets feared that they might face a legislative backlash as a result.