What will Esselunga, Pam, Coop and Conad do against inflation?
All the moves of large retailers in the fight against inflation. Mario Sassi's in-depth analysis from his blog
I think it is of interest to the whole agri-food chain and of the country to avoid that the probable resumption of an inflationary process takes place in a climate of strong conflict between different interests. However, the signs are already there. Upstream those who find the prices of energy and raw materials increased and fear further worsening for the future are those who think that it is enough to say no to any increase without realizing that we are entering a delicate phase because declarations, actions unilateral containment of prices, requests for adjustments, expectations of businesses and households, rather than solving or mitigating the problem, amplify it and risk creating more damage than they intend to solve.
The consolidated practice in commerce in general and in large-scale distribution in particular has always been to raise prices with a certain degree of confidentiality and lower them with trumpet blasts. Nobody announces price increases with a light heart. Just change the price tag on the linear or, in some cases, adjust the weight and packaging. Discounts, rebates, below cost and competitions on the contrary are accompanied by fanfare.
But today the music is changing. The suppliers that have undergone substantial real increases have found themselves faced with a barrage from the large-scale retail trade accompanied not only by the explicit dispute on the actual need to increase them but, in many cases, with a request to continue with promotional policies aimed at compressing the margins to support turnover.
Some suppliers, more exposed than others, have hypothesized a slowdown or even a suspension of deliveries such as to give a strong signal to brands and consumers. A move in my opinion extremely reckless and destined to backfire on those who should ever implement it. The structure and fragility of our upstream production system is such that moves of this type spring up in the bud.
On the large-scale distribution front, the best performing brands have even forced their hand. The charge was played by Esselunga. One of the few realities that has its accounts in order, is not obsessed with costs, has the strength to reject these requests and at the same time the ability to leave competitors who cannot afford such aggressive commercial policies at the stake. It is true that the starting point between the different price signs was different but the safety car put on track by the Government to narcotize the economic and social unease of the acute phase of the pandemic and favor the recovery suddenly put everyone on the same level, no longer penalizing. from time to time the signs on the basis of the prices charged and thus causing a sort of restart.
Online and discount, have continued their march, but have not substantially affected the overall economic results of this year. If anything, they added a little lead to the wings of the signs that were already signaling difficulties. Therefore, all placed more or less on the same level can win those who, before others, have understood the latent fear of an inflationary recovery perceived in the air by consumers and hidden by the authorities for obvious economic reasons, compared to those who, even with policy of "always low prices", has focused on continuity by not satisfying the concerns and fears that the pandemic has sown in many social areas of the country.
The slogan against the "high cost of living" proposed by Esselunga is no coincidence. For a part of the population it evokes the bad memories of the country with double-digit inflation and proposing it again today signals the desire to intercept a qualitative leap in the perception of the fears of the citizen-consumer. Obviously, there are niches, even substantial ones, of medium-high range consumption that must be supported and managed but the concern of an inflationary recovery is certainly prevalent at this stage and will certainly be so in the coming months. And this cannot be ignored by all the brands of the large-scale retail trade.
Therefore the problem of price adjustment, if not managed correctly, risks seriously compromising the relationship between the companies upstream and downstream of the supply chain. Above all, their economic and employment balance. And this necessitates the ability to separate the “wheat from the chaff” in requests for increases. The bet on the table is obvious. If inflation were to be transitory as the monetary authorities wish, the tactics put in place to reject the requested increases to the sender is certainly a winner.
Mario Seminerio, however, correctly points out "what will happen if prices stop rising but do not go back to where they came from, especially for socially sensitive items such as energy? In Italy we are already seeing increasing shares of public resources destined to reduce the burden on the most economically fragile citizens. If this situation were not transitory, we would have serious budgetary problems ”. Personally, I share the concern and therefore I can only hope for a serious negotiation of the supply chain.
Luca Ricolfi recently wrote in Repubblica that it is “difficult to think that in this match Italy will take sides in favor of the enemies of inflation. Whoever governs us will be well aware that a little inflation is good for public finances ”. But if this matter is left in the hands of individual companies, the logic destined to win will be exclusively that of power relations.
Inflation and its consequences will thus become a matter of competition between the brands. It's hard not to understand how it will end. It is quite another thing to deal with the phenomenon within a frame of reference shared, for example, by trade associations. The country is in a delicate moment of economic recovery.
Governing the concerns of consumers, ensuring a balance in the supply chain means at this stage practicing the slogan "earn less to earn everyone". Never as today, however, is it necessary to share balance and responsibility.
This is a machine translation from Italian language of a post published on Start Magazine at the URL https://www.startmag.it/economia/grande-distribuzione-inflazione/ on Sat, 18 Dec 2021 07:36:25 +0000.