HomeMarketsPrice increases in Germany, sales below cost in Italy

Price increases in Germany, sales below cost in Italy

On 1.4.22 the association of the retail trade in Germany announced a second wave of price increases, 'certainly double-digit', while in Italy sales below cost of agricultural and food product suppliers continue.

Inflation and stagflation

Lockdown and restrictions of movement to the unvaccinated had already put the retail physicist in Germany. On 1.2.22 the director of HDE, Stefan Genth, estimated a ridiculous growth in turnover in retail physical (+ 1,2%) than that online (+ 13,5%). (2) But the increase in energy costs - before the war - had forced an average increase of 5% 'across the entire product range ', he later clarified. (1)

Inflation it had therefore exceeded (and thwarted) growth forecasts even before the conflict. And the worst is to come, with stagflation (crasis of stagnation and inflation). (3) Causes and symptoms are obvious:

- internal consumption is held back by the reduction in 'real income' and concern, not only about energy and food (4,5) but also about the economy and work, (6)

- L ' export in the Old Continent is destined to a similar decline, that towards Asia potentially at risk due to the tightening of diplomatic relations.

Germany, second wave of price increases in large-scale distribution e discount

The giant ALDI - famous all over the world for the motto 'Less is More'(lower price, higher product) - had increased the prices of around 180 items in Germany in the second half of March. And the other supermarket chains followed the latter's example retailer food in Europe, with 12.600 stores and € 125,3 billion in turnover (Retail Index, 2020).

Just today ALDI introduces new prices, with increases ranging from + 20% to + 50%. Meat, butter and products of animal origin are 'significantly more expensive'for suppliers, and so for distributors and consumers. Rewe (in third place in the EU with 8.369 supermarkets and € 63,7 billion in turnover), Edeka (in fourth place in the EU, with 3.600 stores and € 61 billion in turnover) and Globus will in turn be forced to increase prices at detail.

War economy

Eurostat indicates + 7,5% the average inflation rate in March 2022, compared to the previous year. Netherlands + 11,9%, Spain + 9,8% Germany + 7,6%, Italy + 7%. (7) For now, France and the UK are not much better. (8). 'Since the start of the war in Ukraine, there have been increases in purchase prices that we have never experienced before'(Florian Scholbeck, Aldi Nord, 1.4.22).

'We will soon be able to see the impact of the war reflected in the price labels in all supermarkets'. (Josef Sanktjohanser, president of Handelverband Deutschland, HDE)

The increases prices and fears of shortages have already led to compulsive purchases of cooking oils and flours. Some supermarkets in Germany and Italy have imposed shopping limits. In Spain, the government has given the green light to the rationing of foodstuffs, having regard to the blocking of supplies of wheat and sunflowers from Ukraine and Russia, oil costs, drought. (9)

Sales below cost, the Italian anomaly

Italy it is the closest country to Germany both for its energy dependence on natural gas and for the role of the national food industry (third and first in the EU, respectively). However, suppliers of agricultural and foodstuffs in Italy continue to be denied by buyer the recognition of extraordinary increases in production costs.

Sales below cost - only in theory banned in Italy, with Legislative Decree 198/21 (10) - are thus leading to the collapse of the protagonists of Italian agri-food production. Farmers and breeders, artisans and SMEs but also small and medium-sized industries - with a tragic impact on the country's employment and economy.

Conflicts of interest and under cost, cancer

Conflicts of interest (that is, private corruption) are the real cancer of the country-system. The 'supply chain agreements' that took place in 2020-2021 between the representatives of agriculture, industry and large-scale distribution have laid the foundations for the UTPs directive (Unfair Trading Practices, dir. UE 2019/633) was effectively disapplied in Italy. (11)

Mario Draghi's government - under the orders of Coldiretti's magic circle, as also seen in the case NutriScore - thus entrusted the controls on sales below cost to the superheroes of ICQRF, 360 inspectors already overburdened by a series of supervisory tasks on 3 million companies in Italy. (10)

Metastases and treatment

The metastases conflicts of interest and underselling sales in Italy - where the food industry is the leading manufacturing sector - corrode the economies of the territories and aggravate those uncertainties that contribute to the crisis even more than the (already tragic) real economic data.

The care at below cost it is simple, it is necessary to immediately apply the legislative decree 198/21 verifying the real costs of production of agricultural and food products. This will result in a rise in retail prices that is inevitable anyway, the lesser evil than a crisis that can cause unprecedented levels of unemployment.

Stemming the crisis

Stemming the crisis it's just as simple. Stop sending weapons to a third country in conflict and stop the sanctions that have hit Europe far more than Russia. Transfer to welfare the resources just allocated for the increase in spending on armaments, so that confidence and internal consumption can reactivate the system.

To forget it the hypothesis of buying unsustainable gas from fracking at stratospheric costs, which, among other things, would reduce the international competitiveness of our industries. Natural gas must remain the intermediate step towards renewable energies to which only investments must be made, without taking steps backwards.

Dario Dongo

Footnotes

(1) German consumers to be hit by further price hikes in supermarkets. The Local De. 1.4.22, https://www.thelocal.de/20220401/german-consumers-to-be-hit-by-further-price-hikes-in-supermarkets/

(2) Inflation to cancel out German retail sales growth in 2022 - HDE. Reuters. 1.2.22, https://www.reuters.com/world/europe/inflation-cancel-out-german-retail-sales-growth-2022-hde-2022-02-01/

(3) Stagflation in Europe 'to hit real incomes'. DW extension. 21.3.22, https://amp.dw.com/en/stagflation-in-europe-to-hit-real-incomes/av-61201112

(4) Dario Dongo. Gas and electricity, an announced crisis. GIFT (Great Italian Food Trade). 20.3.22/XNUMX/XNUMX, https://www.greatitalianfoodtrade.it/mercati/gas-ed-energia-elettrica-una-crisi-annunciata

(5) Dario Dongo. Food security, thesis and antithesis of the European Parliament. GIFT (Great Italian Food Trade). https://www.greatitalianfoodtrade.it/idee/food-security-tesi-e-antitesi-del-parlamento-europeo

(6) IFO Institute. Short-Time Work in Germany Somewhat Lower. 4.4.22, https://www.ifo.de/en/node/68837

(7) Eurostat. Flash estimate - March 2022. Euro area annual inflation up to 7.5%. https://bit.ly/3u5DyLi The details on https://bit.ly/3NXfbaD

(8) Brad Gray, Simon Neville. Supermarket sales surge at Aldi and Lidl but plummet at Asda and Morrisons as prices rise. Herts Live. 29.3.22, https://www.hertfordshiremercury.co.uk/whats-on/shopping/supermarket-sales-surge-aldi-lidl-6874537.amp

(9) Dario Menor Torres. Spain. We have food rationing in stores in anticipation of the worst. The Subsidiary. 1.4.22, https://www.ilsussidiario.net/news/dalla-spagna-da-noi-ce-razionamento-di-cibo-nei-negozi-in-previsione-del-peggio/2316419/amp/

(10) Dario Dongo, Maria Rosaria Raspanti. Unfair Business Practices. From the Antitrust to ICQRF, the needs of the agri-food production chain. GIFTS (Great Italian Food Trade). 29.3.22/XNUMX/XNUMX, https://www.greatitalianfoodtrade.it/idee/pratiche-commerciali-sleali-dall-antitrust-a-icqrf-le-esigenze-della-filiera-di-produzione-agroalimentare

(10) Dario Dongo. Unfair commercial practices, double-discount supply chain agreement. GIFTS (Great Italian Food Trade). 7.3.21/XNUMX/XNUMX, https://www.greatitalianfoodtrade.it/mercati/pratiche-commerciali-sleali-accordo-di-filiera-al-doppio-ribasso

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Dario Dongo, lawyer and journalist, PhD in international food law, founder of WIISE (FARE - GIFT - Food Times) and Égalité.

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