The BABM responds to an earlier Nielsen study by warning for the "detrimental effects" of a possible price war in the Belgian distribution branch.
"Not a price war, but firm competition"
The Belgian-Luxembourgian association of brand manufacturers (BABM) does not feel there is a price war at the moment, "but rather a firm competition between distributors, a sign of an open market. Three large distributors have their own particular position in the market nowadays through a strong focus on quality, product range and service."
BABM CEO Thierry Van der Haeghen points out that this balance may shift in the future "as a new player, like Albert Heijn, rises up, but only if it is willing to invest and become a nationally important party."
Belgium "not the land of plenty"
The BABM categorically denies that the distributors apply (abnormally) high margins in Belgium, contrary to what some media outlets are saying. "Belgium is not the land of plenty, despite what some may say... If, in some cases, the price is higher, then its costs are as well! These are linked to labour cost, energy, marketing, R&D, ..."
The CEO also points out that international price comparisons are always very difficult to interpret: "The 12 % price difference between Belgium and the Netherlands ignores coupons, which are worth some 2 %. The price difference between the Belgian stores is also way higher than the difference between the average Belgian and Dutch store formula."
"Negative effects in the long term"
The association's fear is that an eventual price war - which Nielsen did not rule out - "may lead to a huge value drop in this particular branch. The consumer may benefit from lower prices in the short term, but there are substantial negative effects in the long term." A stark decline in the product range and decreased innovation and market activity are some of BABM's fears.
"Retailers are responsible for the price they charge in their stores, but price drops would affect the entire supply chain. The macro-economic effects would definitely impact the state's income and employment rates and that is why we will not ignore the debate about our companies' competitiveness", Thierry Van der Haeghen said.
Founded in 1994, the BABM protects the interests of 43 Belgian and Luxembourgian companies, which all manufacture (inter)national FMCG (Fast-Moving Consumer Goods) brands. Put together, these companies have a joint turnover of 5.8 billion euro and apparently represent 36,900 jobs, both directly and indirectly.