The context
A steady and unprecedented price uplift
In Europe, price increases are continuing at a steady pace and reaching record levels. This increase is unprecedented, because it is both across all products categories and also multifactorial (after the escalation cost of shipping containers, there was increased packaging, components and energy). Whilst grocery retailers initially chose a “wait-and-see” attitude in the first half of 2022, each wanting to be the last to pass on the cost increases to consumers, things changed after six months. Depending on a degree of independence (integrated or independent group), retailers are now passing on price increases from suppliers, radically and swiftly. In France, E.Leclerc (the largest retailer with a 22.2% market share in P12 2022) is taking advantage of a leadership position to delay price increases and pass them on, after all competitors. In February 2023, the gap between the two most expensive French food retailers and the two least expensive exceeded 30%. This is an historical record for more than 15 years (source IRI).
However, this price increase must be put into perspective. While 70 years ago, food spending accounted for more than 40% of the European household budget, it accounted for only 13% in the EU 27 in 2019, according to Allianz Trade. There are also significant local : this share of spending reaches 16.4% in Poland, 14.3% in Italy, 13.1% in France and 10.8% in Germany. For 10 years, food prices have also stagnated in France, with periods of deflation. While deflation is paused, some experts consider the current price increase to be a form of “catch-up”.
More or less interventionist States
In Poland, Prime Minister Mateusz Morawiecki declared that the V.A.T. rate on food products would remain at zero for several months. Initiated in February 2022, with a fall of 5.5% V.A.T. to 0%, this measure has been extended throughout the first half of 2023.
In Hungary, Viktor Orban’s government introduced a price cap on certain food products in 2022.
