The aggressive promotional tactics adopted by French retailers is nothing new. But for the last couple of years, French retailers – especially those operating in the hypermarket format (Casino and Leclerc) – have been engaged in a full-blown price war, leading to a marked deflationary trend (Figure 3).

Figure 3 – Year on year inflation in FMCG products in France (in %)

Source: IRI

Since its onset in 2013, this phenomenon has caused 2.6% deflation in the hypermarket and supermarket channels, although it has not affected all brands and categories equally. As can be seen in Figure 4, the leading brands have been the worst hit by the price war with a fall in prices of more than 4 percentage points, while the private label has maintained its positioning.

Figure 4 – Trend in inflation in France (% variations 2013-2015)
 

This result is disagreeable both to the manufacturers, who see their products devalued, and to the retailers who find themselves with private label products that in some cases are more expensive than the equivalent manufacturers’ brands. In 2014, while sales of leading brand products increased by 2.1%, private label products suffered a 2.3% contraction. This trend has continued through the current year and affects 8 out of 10 categories. The difference in sales volumes between leading brands and private labels is growing wider, as shown in Figure 5.

Figure 5 – Volume growth differential between national brands and private labels