“I don’t understand why these products are increasing so much…” On BFMTV this Monday, December 5, Michel-Edouard Leclerc admitted his perplexity at the prices presented to him by pet food manufacturers. On an A4 sheet that you take from television shows to radio studios, you can read the list of your most important suppliers with a percentage increase associated with them.
It is in the “petcare” box (animal feed) where the figures are highest: +17% for Nestlé petcare, +39% for Mars petcare. This is not the increase expected in 2023 in stores but the increase desired by manufacturers and passed on to distributors when trade negotiations begin, which will end on March 1, 2023.
If E.Leclerc, Carrefour and other Intermarché try to limit the increase, the price may still end up inflating by 20 to 30% for the consumer, estimates Olivier Dauvers, a consumer specialist, after a 13% increase in 2022 according to Iri’s signature. Between 2022 and March 2023, the increase could therefore be between 35 and 45% for animal feed.
An energy intensive manufacturing process
Are these increases justified by cost increases?
Some small manufacturers recognize price increases but in these proportions. This is the case of Matthieu Wincker who founded Ultra Premium Direct in 2015, which directly produces and sells animal feed products.
If for next year it warns that there will be a new price increase of around 10%, we are still far from the prices offered by the two multinationals.
As for raw materials, we can cite the 42% increase in poultry due to bird flu, the rise in the prices of cereals from which starch is made but also animal fat (+200% in two years) with which the kibble is covered and which is increasingly monopolized by the oil industry for biofuels.
In addition, the manufacturing process consumes a lot of energy. The manufacture of croquettes is what is called industrial extrusion. The ingredients must be mixed, put under pressure at 30 bars, heated to 130°C before allowing the croquettes thus formed to dry before being basted with fat.
Two groups control 80% of the market
While manufacturing costs partly explain the expected price increases, the structure of the market is also in question.
Michel-Edouard Leclec thus evokes these duopolies in many markets that would set prices. If they are careful not to mention a deal, he suggests that weak competition would tend to push prices up.
Almost 80% of the pet food market is in the hands of the two agri-food giants. Swiss company Nestlé markets Friskies, Felix, Gourmet, One and Pro Plan products in specialty stores under its Purina umbrella brand. On the side of the American Mars, there are the other giants of the department such as Whiskas, Royal Canin, Pedigree or Cesar.
International groups that want to protect their operating margins despite rising costs. At Nestlé, for example, it held at 17% in the third quarter despite rampant inflation. Mars Inc., for its part, is a company that belongs to the family of the same name, it is not obliged to publish these financial results. However, the company announced a turnover of more than 50% for the year 2021, placing itself ahead of Coca-Cola for the first time in terms of sales. Enough to pay generous dividends to the Mars family, two of whose members are among the 20 richest on the planet according to Bloomberg.
To limit price increases, these companies could have sacralized the margins in values and not in percentages. This is the choice made by Ultra Premium Direct.
Source: BFM TV
