Warning shot to the manufacturer: That's behind Edeka's tough price war

This article first appeared on n-tv.

Warning shot to the manufacturer: That's behind Edeka's tough price war

This article first appeared on n-tv.de

An extraordinarily sharp price war has broken out in the food trade. A total of 17 companies no longer supply Edeka. Germany's largest food retailer no longer gets products from consumer goods giants like Procter

Even for experts like him, it is difficult to assess whether Edeka is right in accusing the food giants of charging excessive prices. But Rüschen also has the impression "that the manufacturers are using the currently high inflation to raise their own price levels". However, in the eyes of the industry expert, Edeka is also pursuing its own goals with its aggressive approach to the public.

On the one hand, the international manufacturers earn comparatively little in Germany because the local customers shop very price-oriented, i.e. spend a relatively small part of their income on groceries. Discounters achieve a market share of 40 percent in Germany, as Rüschen explains. "As a result, the producers' German subsidiaries are under internal pressure to achieve higher margins." Right now there is an opportunity to actually achieve that. In this respect, the accusation of excessive prices cannot be dismissed out of hand, says the trade expert, even if it is difficult to prove or even quantify.

On the other hand, according to Ruffles, Edeka uses the moment for signals to three recipients. "You try to present yourself as the customer's advocate." By taking the dispute to the public, the supermarket chain also warns all other manufacturers that Edeka will not simply accept price increases, but will also negotiate hard with them. Thirdly, Edeka also used this route to signal its independent retailers that the group was negotiating hard for them and that they would have to support the temporary delisting of a manufacturer.

Edeka boss Markus Mosa's accusation is aimed primarily at the large branded goods manufacturers - who have been able to increase their profits in the past two years. "However, these are only the international and not German figures," Rüschen clarifies. And the four large German retail chains - Edeka, Rewe, Schwarz Group and Aldi - have enormous purchasing power with their high market shares, but this is significantly smaller for the large international manufacturers. Because a global company can definitely afford to drop out of the range in Germany.

Though probably not for long. "I can't imagine that the large corporations will no longer be represented at Edeka and Rewe in the long term," says Thomas Roeb, professor of retail management at the Bonn-Rhein-Sieg University of Applied Sciences, in an interview with ntv.de. In his estimation, both sides will find a compromise. However, the public will not find out who performs better, because the companies will not disclose their conditions, in contrast to the price war.

The manufacturers reject the accusation of excessive prices, which Rewe also raises. Henkel, for example, refers to the current "extremely high" raw material and logistics costs in response to an inquiry from ntv.de. "We cannot fully compensate for this increase, which we have never seen before in this breadth and in this form," said a company spokeswoman. "Therefore, there is no way around having to pass on at least parts of it with price increases."

For Edeka and Rewe, the prices of branded items play a particularly important role. According to Rüschen, discounters make 30 to 40 percent of their sales with branded items, while Edeka is more like 70 to 80 percent. In addition, Edeka and Rewe would have to achieve similar prices as the discounters. For the latter, however, the prices of branded products are also very important. "In this respect, Edeka boss Mosa already speaks for the entire trade," says the industry expert. As the food retailer with the highest turnover in Germany, Edeka is simply the first company to be in demand. The other grocers only appeared calmer.

Management consultant Heike Adam, who used to work for Henkel herself, defends the producers. Prices are formed in advance and for a longer period of time, she explains in an article on the Austrian platform "Sheconomy". While the costs are generally easy to plan for the most part, everything was different last year - the duration of the Ukraine war and the development of energy prices were assessed with increasing pessimism. A gas shortage threatened temporarily, the inflation rate rose and rose. "From this perspective, the currently particularly high profits are not an expression of greed or greed inflation, but the result of the existing major crises and their unpredictability," writes Adam. Profits now formed an important reserve for the ongoing inflation, and company shares remained attractive, especially for small investors. Profits also served to compensate for past losses.

Rüschen also sees the current great uncertainty as playing a decisive role in manufacturers' price calculations. A producer that could actually lower its prices in the short term because energy prices are falling again might not do so because in a year's time it would have difficulty raising them again if necessary. Because the prices of branded products usually do not fluctuate within a year. "This can mean that a manufacturer wants to push through a higher price at the moment than he actually needs at the moment," says the trade expert.

With a view to consumers, industry experts are nevertheless confident. On the one hand, future price increases are unlikely to be as strong as in the past few months. On the other hand, the competition seems to work. In the meantime, Roeb had feared a "petrol station situation" that would mean that there would no longer be a price war. In the meantime, however, retailers are even lowering prices in some cases, for example for dairy products. "When the leeway is there, the trade also uses it to distinguish itself in terms of price," says Rüschen. Edeka and Rewe not only compete with each other, but also with the discounters. "That's why we don't have to fear runaway inflation in the food trade."