“Belgian food industry suffers from procurement policy supermarkets”

Supermarket chains are increasingly buying from abroad, reducing the proportion of Belgian products in shops. The combination of price pressure and rising costs weighs heavily on the food industry’s profitability, its sector federation warns.

International procurement

The Belgian food industry is losing market share, both at home and abroad, sector federation Fevia says. The share of domestic products in Belgian supermarkets has fallen by several percentage points to 61 % in recent years, as supermarket chains want to exploit economies of scale by buying European through alliances.

Dutch chains Albert Heijn and Jumbo (which are still gaining market share in Belgium) and discounters Aldi and Lidl have taken a very tough stance in procurement negotiations, Fevia told Belgian newspaper De Standaard. Even Carrefour hardly buys any Belgian products any more, according to the federation, despite the retailer emphasising Belgian and local products in its communications. Still, it now conducts its negotiations via its European headquarters in Madrid, Fevia’s new president Nathalie Guillaume told De Tijd. The tough price negotiations prevent manufacturers from passing on their rising costs, she warned.

“Companies in danger of disappearing”

The result is logical: the profitability of Belgian food companies is at an all-time low of 2.32 %, which is one-third lower than in 2019. Moreover, 40 % of companies expect their profitability to fall even further. “If things do not start getting better soon, companies will no longer be able to invest in the future and some are in danger of disappearing”, the sector organisation warns.

The sector faces a triple handicap, the organisation claims, with labour costs 25 % higher than in neighbouring countries, while companies also pay more for electricity and there is a higher tax burden. On soft drinks, Fevia claims there even is a 126 % tax handicap. With a 3.57 % wage increase coming up in January and a 77 % increase in energy distribution tariffs, costs will continue to rise in the coming years.

Remarkable timing

The federation’s accusations against food retailers are remarkable, but the timing may not be entirely coincidental. After all, the annual price negotiations between retailers and their suppliers do take place during this period. Those talks are becoming ever more difficult, given the high competitive pressure.

Carrefour was quick to deny Fevia’s accusations: “We only buy a very small percentage from large multinationals”, spokesperson Regine Van Tomme told RetailDetail. “The vast majority of purchases are done locally, and nothing has changed in our model in that respect. We do attach great importance to Belgian and local products, and we often speak directly to smaller producers.”