The energy crisis and inflation are increasing tensions in negotiations between Ahold Delhaize and its major suppliers. “I expected more cooperation”, CEO Frans Muller says.
“Lack of cooperation worries me”
Although Ahold Delhaize announced strong quarterly results today, the Dutch retail group emphasises that the situation in Europe is more difficult than in the United States. Rising energy costs and a challenging economic environment are putting pressure on the profit margin in Europe (which is just 3.41 %, compared to 4.95 % in the US), Muller said in a conference call. In part, this is because retailers are taking some of the price increases on themselves, says the CEO. Muller, however, says that suppliers should also contribute: “I would have expected more cooperation from our partners. Major suppliers continue to insist on profit margins of up to 15 %. That does worry me.”
The CEO therefore expects annual negotiations with suppliers to be difficult: “We have never had so much work with supplier negotiations. We do not simply accept every rate increase. We know how much raw materials cost thanks to our private label products, which account for half of our supply. If a brand supplier asks for a 15 % rate increase while we see that the raw materials have become much less expensive, we refuse”, Belgian newspaper De Tijd noted.