Supermarkets are trying to win over consumers in these times of high inflation with promised price cuts. But the bill for that ‘war of the supermarkets’, which is played out between them, is paid by the producer. So says retail and marketing expert Sabine Duetz of Bien Innovation.
Supermarket chain Dirk van den Broek has announced it will make hundreds of products cheaper and won’t raise the price until at least the end of this year. Albert Heijn had previously announced that he would offer fresh fruit and vegetables more often.
Position of power
“Consumers are happy that prices are coming down, especially in these times, but ultimately, the person at the top of the line foots the bill,” Duetz says. These are the farmers and producers who no longer receive a fair price for their produce. Managing partner Koen de Jong of International Private Label Consult also sees that negotiations between supermarket chains and manufacturers are progressing rapidly.
‘As a manufacturer you know you are interchangeable, supermarkets have the greatest position of power’
‘As a producer you know you are interchangeable. Supermarkets hold the greatest position of power and in fact there are only five large purchasing organizations in the Netherlands. They determine which manufacturers can supply the products to which stores. If you don’t belong to that group, you are excluded,’ explains De Jong.
Redeemable
De Jong sees that small and medium-sized enterprises in particular are being pitted against each other by large supermarkets. This is because they provide private label contracts, making them interchangeable. “A supermarket can choose between different producers, for example spaghetti or tomato soup, in order to better negotiate prices.”
However, both experts are unafraid that this will actually lead to a supermarket war, such as the one waged earlier this century. “Supermarkets can use all kinds of marketing rhetoric to say that prices need to come down and there will be a supermarket war, but manufacturers still can’t cut costs,” explains De Jong.
Small profits
According to De Jong, we come from an era in which costs have increased on all fronts. “Raw material, energy, labor and transportation costs have increased due to the disruption of the food chain. Those prices have to be passed on in the higher costs of supermarkets. The reality is that the prices of deliveries to supermarkets have also increased».
“Large companies have passed on price increases to customers”
Despite this, large companies in particular have made substantial profits, Duetz says. ‘They passed on the product price hikes to the customers.’ The marketer therefore believes that it will benefit no one if a supermarket war actually breaks out. “Eventually, we will all be victims.”
Source: BNR
Andrew Dwight is an author and economy journalist who writes for 24 News Globe. He has a deep understanding of financial markets and a passion for analyzing economic trends and news. With a talent for breaking down complex economic concepts into easily understandable terms, Andrew has become a respected voice in the field of economics journalism.
