Producers-industrial-mass distribution: behind the scenes of price negotiations

Nicolas Bringer, patron de l'Hyper U de Mende et président de la Coopérative U pour le Sud de la France.

De l'agriculteur au consommateur, en passant par le transformateur, le processus de fixation des prix des produits suit un cheminement extrêmement balisé. La différence se fait au niveau des échelons géographiques.

Since the end of January, France has lived to the rhythm of the anger of farmers, dissatisfied with the practices of mass distribution in terms of remuneration. It must be said that with the return of inflation at the end of 2022, the government, to silence that of consumers, is putting pressure on major food brands so that they lower their public prices.

At the other end of the chain, producers, weighed down by rising production costs (energy, inputs, in particular), pass on the selling prices of their products. Which is not necessarily well received by distributors, already under pressure from public authorities. Decryption of the negotiation process.

1. Is there a single large distribution ?

No. At least that’s what Nicolas Bringer, boss of the U hypermarket in Mende and president of the U Cooperative for the South of France, wants to point out. "We often talk about mass distribution, but we confuse two totally different worlds. We cannot compare. There are certain market players, such as Carrefour, which is listed on the stock exchange, it is a multinational, which operates stores with salaried managers who spend a few years in a store before leaving for another country. other end of France", he explains.

Then, "on the other hand, independent networks like U, but also like Leclerc or Intermarché, which are very different". The cooperative organization, as practiced by the aforementioned brands, is based on a"central entity, which is not intended to make money, it's just a tool that belongs to business leaders, who are at the head of a store, and who provide support services to the stores: logistics, IT, marketing, purchasing, etc.".

According to him, "the only profit center is the store". As for "the money we earn in our stores, it does not go to shareholders, it is reinvested in our stores". This is the same characteristic of brands run by independent owners. "It will not feed shareholders, it is reinvested in the territories", he adds. Thus, on a national level, U stores are "more than 50% present in municipalities with less than 5,000 inhabitants".

2. How are suppliers chosen ?

L'hyper U de Mende works with "more than 70 local producers", that is to say installed in the Lozère department, which offer a thousand products in total. On the shelves, above each stall, a panel presents the producer of the product on sale, the date of the collaboration and the distance of its operation from the store. "The relationship starts with that", insists Nicolas Bringer.

Negotiation takes two forms."Sometimes, a producer we don't know comes to see us, offers us his products. Sometimes, we have seen a new producer who has just set up, we go to see him, we offer to market his products with us,, specifies the Lozère boss. On the other hand, the industrialists have their own approach. "At the end of October, we send our specialized distribution network our prices that we wish to see applied", confides Hervé Pauze, commercial director of Prosain, agri-food group specializing in organic, based in Bages, in the Pyrénées-Orientales.

Once contact has been made, it's time to think about the relevance of referencing the product or not. "As a store owner, my first decision criterion is: is the product offered already present on our shelves? ;quot;, says Nicolas Bringer. He takes the example of aromatic herbs. "In Lozère, we only have one producer. So if someone comes to offer me one, I'll find it rather interesting, because there isn't already the offer". "Honey producers, we already have several. Offering customers all-flower honey from six different producers in Lozère, it is not relevant to add a seventh. At some point, it will have its limits, it will divide everyone's sales and then it will not help them to come and deliver us a package from time to time".

3. How the negotiations are going ?

For a store owner, they do not take place in the same way depending on whether we are dealing with a local producer or a multinational. "With a Lozère supplier, it's simple, continues Nicolas Bringer. He will offer his price. I'm just going to look at the average margin we take on all our local suppliers. Check if the sale price that will come out is consistent with the products that we already have in this range. If the store does not offer   nbsp;local products of the same range, "look at the national average prices of the range". An agreement could be found on these bases .

Generally speaking, negotiations take place at different levels. "The first is the local level, that of the store. Often, the producer is not capable of doing For large volumes, contact the nearest store. This is the short circuit. This is what we call a master purchase, it is the store that buys directly from the producer". The second level is that of more regional producers, with already greater production capacity, "like Midi Tielle, in Sète, or a large winegrower" .

In the case of U stores, this negotiation will take place at the regional headquarters of Vendargues, near Montpellier. It supplies two regions with fresh produce: Occitanie and PACA. "The negotiation is carried out by a permanent employee, specialized in the products in question, in pair with a store boss, a U" associate. The third level is the national level. "There, we are addressing national companies", slips the regional president of Cooperative U. If the head office of The brand is located in Rungis, in the Paris region, this is not where the negotiations take place. "The national delegates negotiations to the regions. Vendargues thus takes care of national negotiations according to the products concerned.

The final level remains: international. "There, it's the negotiation with the 44 largest multinationals which are among our suppliers". The U brand has formed a partnership with other major European brands, such as Edeka in Germany or Jumbo in the Netherlands, to pool negotiations and purchases from these multinationals.