Nestlé and Danone price hikes may put them on France's inflation watch list

French shoppers have paid more than 20% more for Nestlé products each month since January compared to last year, data shows

French prices of products made by Nestlé, the world's biggest food company, and Danone have increased by substantially more than 10% since the start of this year versus last year, according to NielsenIQ data.

Food giants Nestlé and Danone are among firms whose product prices in France have risen by more than 10% this year, data shows, potentially putting them under government pressure to renegotiate with French retailers.

French finance minister Bruno Le Maire said earlier this month he had secured a pledge from 75 food companies to cut prices. 

Food industry lobby group Ania set the following conditions for consumer companies to agree to the price cuts: That they had raised prices by over 10% during the last round of negotiations; and that their input costs had fallen by over 20% since the beginning of March. 

It is not clear how many companies met those criteria.

Whereas in most countries retailers and food producers adjust the price of products frequently, France has set by law a three-month time window when such negotiations can take place, between December 1 and March 1 every year. Prices are then fixed for a full year, unless one-to-one deals include review clauses.

The French prices of products made by Nestlé, the world's biggest food company, and Danone have increased by substantially more than 10% since the start of this year versus last year, according to NielsenIQ data.

French shoppers have paid more than 20% more for Nestlé products each month since January compared to last year, the data showed, and price increases peaked at 36.6% in May. Nestlé, whose brands include Maggi stock cubes and Kit Kat chocolate bars, declined to comment.

Similarly, stores sold products made by Activia yogurt owner Danone for between 11.2% and 16.7% more than last year in the first six months of the year.

"Just like the rest of the industry, inflation has driven increases in our input costs across energy, transport and raw materials. In response, and aligned with the French government’s call, we played our part in the collective effort to limit the inflationary impact on consumers," Danone said in a statement. 

Meanwhile, grocery giant Unilever beat underlying sales growth forecasts after again raising prices to offset higher costs, boosting shares in the maker of Dove soap and Ben & Jerry's ice cream.

The company reported a rise of just under 8% in underlying second-quarter sales. "My early immersion in the business has confirmed my belief in Unilever's strong fundamentals," new chief executive Hein Schumacher said. 

"What the market's taking positively today is that you haven't seen a sharp decline in volumes despite them pushing through pricing," said Richard Saldanha, a fund manager at Unilever investor Aviva. 

• Reuters