War in the Middle East: Should We Fear a Rise in Prices in Supermarkets?

Will prices in the aisles see another spike? Consumer prices in France, driven by oil prices, rose by 1% in March, slightly more than initially reported, and 1.7% year-on-year, as announced on Wednesday, April 15 by Insee in its final results. With the Middle East conflict, concerns are also beginning to arise among retailers, who are worried about future deliveries. These global price fluctuations could particularly weigh on own-brand products ranges, with a risk of price renegotiation before the end of the year.

Example with Raphaël Louerat, a star in his town, sometimes recognized with his photo on Intermarché-branded milk cartons. Thanks to a partnership, this farmer in Loire-Atlantique, 20 kilometers from Pornic, receives a percentage annually on sales which he invests to improve the well-being of his cows.

But this doesn’t protect him from sudden cost increases related to the Middle East conflict. “Until now, our expenses hadn’t really moved,” he says. “But now, they announce a 15% increase in the transport of cereals and oil, diesel, GNR, it can be a big burden,” laments the farmer.

Protein pastes, garbage bags made of seaweed, deodorants with 99% natural origin… Intermarché promises a new product every 15 days in its own-brand range. These products, on average 30% cheaper than national brands, are very popular among consumers. But the geopolitical context with the Middle East war and international price fluctuations could impact these product ranges. This uncertainty is shared by the Lyon-based SME Chiche!, which manufactures chips, particularly based on chickpeas. The company has made efforts to become a new supplier for Intermarché for its own-brand products intended for aperitifs.

However, Pauline Janin, general manager of Chiche!, had not anticipated energy price variations. “We’re experiencing them,” she admits. “We are not big enough to have alternative strategies. We have opted for a fairly aggressive pricing strategy for Intermarché products priced at less than two euros… So this also means reduced margins to seek volume. We hope that volume will be there,” details the business leader.

Intermarché can also play on its margins if production costs increase further. The chain owns around fifty factories dedicated to producing its own brands. However, the exercise has its limits, according to Thierry Cotillard, the president of the chain.

“Agricultural upstream pays more for its diesel when it goes into the field, its fertilizer,” he notes before warning: “We are not immune to a renegotiation during the year for farmers or carriers who may need it.” But Thierry Cotillard also assures that “consumers cannot accept a 10 or 15% inflation in the aisles.”

Currently, own-brand products represent 35% of the chain’s sales, which aims to reach 40% within 3 years.