The tremendous warfare will decrease inflation to the pre-crisis degree after greater than two years with the purchasing basket skyrocketing | EUROtoday

Upon its return to the cabinets of Carrefour, Pepsi hung the '50% low cost on the second unit' signal, in a gesture of “behaving well” after the French chain lifted the punishment imposed by withdrawing all merchandise from Pepsico of its supermarkets because of the “unacceptable increase in prices. It is no coincidence that the aperitif giant, which sells, in addition to soft drinks, potatoes Lay’s o Doritos, bet on the promotion on your return to the supermarket. Behind this decision lies an entire transversal strategy of the large food and beverage brands, which have launched an offensive of offers to try to gain ground on the private label and recover the sales volume lost in the last two years of inflation crisis in our country.

We are witnessing a power struggle between manufacturers and distributors. The former, aware of having lost market share to the private label, try to rearm themselves with promotions to be competitive. Of course, the offers are specific and, in many cases, more focused on 2×1 than on lower prices. The latter start from a stronger position and have opted for aggressive discounts on hundreds of references from their own brands. “It's going to be a really promotional 12 months,” Ricardo Álvarez, CEO of Spain Day, during the company's results presentation in early March. That same week, Lidl burst into the promotional war with a permanent price reduction on up to 200 products. Mercadona and Carrefour They began the battle with similar discount campaigns on half a thousand references in their assortments.

The food giants have already revealed their strategies. In a meeting with the media this week, the president of Calidad Pascual, Tomás Pascual, ruled out a general drop in prices, but advanced an increase in promotions at the point of sale. Already at the end of last year, the general director of another large company such as Arias Butter Shops, Javier Roza, recognized an increase in promotional activity. “We aren’t going to decrease costs, however we encourage consumption with promotions, nearly all producers are doing it,” he said in the presence of the directors of the main companies in the sector during the Aecoc Mass Consumption Congress.

There is a clear change of direction in the direction of manufacturers. While distributor brand promotions had grown by 27% in the last four years, manufacturer brand promotions decreased by 11% in the same period, according to Kantar data. However, now, manufacturers They have changed their strategy and have jumped on the promotional wave to stop the bleeding of consumers who are switching to private labels to try to save on the shopping cart. There is a fact that worries and occupies them: The distributor's brand already accounts for practically 50% of the expense and there is a risk that an important segment of consumers who have switched to private label in this inflation crisis will never buy their products again, because they have found a quality and cheaper substitute.

Sources from the distribution sector maintain that this promotional war and the fight to gain space on supermarket shelves are going to contribute to reduce food inflation to levels prior to the price crisis which broke out more than two years ago. One of the large chains that operate in the country even points out that the CPI for food could once again be below the rate of the general index after the summer, starting in the months of September or October. The difference at the moment is 1.1 points, since general inflation is at 3.2% and food inflation is at 4.3%. A minimal gap compared to the more than 13 point difference that existed just a year ago, when the food CPI soared by more than 16% at the peak of the crisis.

The promotional battle, in any case, will not be the only factor that pushes prices down. “If the geopolitical conflicts don’t escalate, and even when the Government raises the VAT on primary meals once more beginning in June, we are going to see the overtaking from common inflation to meals inflation after the summer time as a result of it has rained loads, particularly in areas very affected by drought, manufacturing goes effectively and no further price stress is anticipated“, predict the sources consulted. Along these lines, in its latest macroeconomic projections report the Bank of Spain predicts a “gradual moderation within the fee of enhance in meals costs” and explains that “the primary ingredient that explains the anticipated slowdown in meals inflationary pressures is the lower within the prices of a number of of its most necessary productive inputs – resembling vitality and fertilizers -, a lower that can also be being mirrored within the costs of meals uncooked supplies.