Macron's Quest for Affordable Cheese Options in France

02 Sep, 2023

Macron's Quest for Affordable Cheese Options in France

French Finance Minister Bruno Le Maire made headlines by publicly calling out multinational corporations, including Nestle SA, PepsiCo Inc., and Unilever Plc, for not taking sufficient action to lower food prices. This move came as supermarkets and consumer goods companies committed to freezing or reducing prices on approximately 5,000 products in the face of a 21% increase in French food inflation over the past two years.

Le Maire also criticized the practice of "shrinkflation," where products decrease in size while prices remain the same. He cited the example of soft cheese brand Kiri, which has reduced portion sizes, a concern shared by consumers who may not readily notice such changes. Advocating for transparency in this regard, Le Maire hinted at more public naming and shaming if companies fail to address these issues. For instance, supermarket chain Intermarche accused Findus of reducing the portion size of its rissolees by 10 grams while increasing the price per kilogram by 68%.

This push for corporate responsibility comes against the backdrop of concerns that even the euro's fastest-ever interest rate hike cycle has failed to have a swift impact on prices or corporate behavior. Consumer prices in France surged by 5.7% in August compared to the previous year, surpassing the 5.4% median forecast of economists surveyed by Bloomberg. Energy costs were a major driver of this inflation, masking what would have otherwise been a more widespread decline in price pressure.

While there is hope that inflation will eventually align with central bankers' expectations, offering room for a less hawkish stance, various unpredictable factors could continue to affect prices. Climate-related issues, such as unseasonal rainfall and a severe summer drought, have driven sugar prices to an 11-year high. Geopolitical instability, exemplified by a rising number of coups d'etat in Africa, may exert upward pressure on commodity prices. Labor shortages, though somewhat alleviated, remain a potential disruptor.

The concern over inflation also reflects broader signs of an economic slowdown in France, evident in the significant drop in the European Commission's economic sentiment indicator for both France and Germany, reaching levels last seen in late 2020. Additionally, employment expectations have declined. France, previously considered one of Europe's better-performing nations, now faces challenges. Recent Purchasing Managers' Index (PMI) figures have fallen considerably below expansionary levels, and economists anticipate minimal growth of just 0.1% in France during the three months ending in September.

This environment of inflation-related challenges and economic uncertainties has led to discussions about the fiscal health of the Macron administration. Rising implied borrowing costs have made higher taxes a less preferable option, especially as CEOs hold the government accountable for promised tax cuts. Amid these conflicting economic forces and with European parliamentary elections on the horizon, certain targets for policy adjustments may become more appealing, including motorway toll operators, airlines, and perhaps even some multinational snack producers.