Introduction

Inflation: Request for a one-year postponement for the application of the Descrozaille law

Since its adoption last March, the Descrozaille law has been awaiting its application for March 2024. It aims to regulate the promotions of certain items in supermarkets. However, it raises questions among major retail players.

It regulates promotional offers for certain products and seeks to balance relationships between suppliers and distributors.

Alexandre Bompard affirms that it limits promotions of drugstore, hygiene and care products to 34%.

The CEO of Carrefour warns of a drop in consumption. He speaks of a “tidal wave of deconsumption” which impacts French households.

The genesis of this bill comes from the deputy of the Renaissance, Frédéric Descrozaille, under the title: “ Law aimed at strengthening the balance between suppliers and distributors”. Overall, it strengthens the position of manufacturers. Parliament definitively adopted it in March 2023.

Restrictions on promotional offers concerning non-food products

The Descrozaille law means the cessation of massive promotions such as “three packs of diapers for the price of one”. Thanks to this legislation, supermarkets will no longer be able to display discounts exceeding 34% in the sections dedicated to drugs, perfumery, hygiene and maintenance (“DPH”).

This rule aims to prevent supermarkets from putting excessive pressure on their suppliers to force them to reduce their costs at all costs.

Although this measure may be seen as a disappointment for consumers, MP Descrozaille argues that it aims to protect employment.

Its objective is to safeguard small and medium-sized businesses that are unable to lower their selling prices, which is crucial even if the supermarkets’ suppliers are major international companies like Procter & Gamble or Unilever, which have also subsidiaries and employees in France.

Extension of the ban on selling food at a loss

The Descrozaille law, introduced since the first Egalim law in 2018, is the subject of criticism from consumers.

Distributors must ensure a profit margin of at least 10% on food products. This rule protects farmers from excessive demands from supermarkets. It remains in force until 2025, except for fresh products such as fruits and vegetables.

However, parliamentary studies question its effectiveness. A Senate report in July 2022 presents reservations.

It mentioned : ” A prominent example of the trickle-down theory, [cette mesure] appears to have only partially achieved its objective, as demonstrated by a senatorial report in 2019. It resulted in an increase in prices for end consumers, without any apparent benefit reaching farmers. This raises questions about the use that was made of these additional margins, estimated at around 600 million euros according to different sources. »

Improved conditions for suppliers

Finally, the Descrozaille law gives more power to manufacturers during annual price negotiations. It aims to clarify an area of legal uncertainty: when producers and supermarkets do not agree on prices. Today, supermarkets keep the old prices even if production costs increase for manufacturers.

Under this new law, suppliers will simply be able to stop deliveries to stores.

More information on the EGalim 3 law

Why was EGalim 3 introduced?

EGalim 3 increases the threshold for resale at a loss to 10% of the purchase price of products, except for fruits and vegetables. This change prevents sellers from offering food products below cost.

What is the definition of an EGalim product?

The EGalim law also aims to guarantee a decent income for farmers by rebalancing the distribution of value. This is based on reversing the pricing approach: farmers offer the contract and the corresponding price, taking into account production costs.

Who is affected by EGalim 3?

EGalim seeks to ensure a fair wage for farmers by balancing the distribution of profits. Farmers now set the contract and the price, taking into account production costs.

Who must comply with the EGalim law?

This law aims to protect small and medium-sized French businesses from harmful promotions. It imposes a threshold for resale at a loss until April 15, 2025, forcing distributors to maintain the price of food products above their cost increased by 10%.

Who is EGalim for?

EGalim applies to all players in collective catering, including school canteens, nurseries and universities.

Editeur de logiciels de Pricing et Supply chain
Pricing and Supply chain software Editor

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