Leclerc boss wants to end 10% profit margin on supermarket foods

The head of the French supermarket group E.Leclerc has called on the government to scrap a 2018 law that obliges retailers to apply a 10% profit margin to their products.

Michel-Édouard Leclerc said this morning (April 27) that he wants the rule removed so that he can “sell products to consumers for less” in light of the current rate of inflation.

“The important thing for us is to be cheaper. Both manufacturers and retailers, we have to lower our profit margins,” he told BFMTV.

He said that the 10% margin that the law obliges is “higher than the current inflation rate”.

France’s year-on-year inflation rate for March was 4.5%, and it is expected to rise to over 5% by this summer. The new inflation rate for April will be known on Friday (April 29).

Mr Leclerc hit out at the 2018 law fixing the 10% profit margin, saying it was “a law of deflation, today we have inflation”.

The Egalim 1 law of 2018 obliges retailers such as Lidl, Leclerc and Auchan to sell food products with at least a 10% profit margin. In other words, when a retailer buys a product from a producer for €1, it is obliged to sell it for at least €1.10.

It was adopted to prevent supermarkets pursuing a ‘race to the bottom’ in terms of prices, and also to guarantee supermarkets a minimum profit so that in return they buy more expensive products from farmers or producers.

Mr Leclerc said his intentions were only good regarding his calls to scrap the law.

“If Leclerc had this freedom [to lower profit margins], we could help consumers,” he said.

He said he does not think that the “trickle-down effect” concept that is behind the law actually works.

Instead, he says it benefits companies with delivery-based models, such as Amazon.

“I want to support farmers by buying at a good price, but let me stop those higher rates reaching customers,” he said.

Can the government scrap this law?

It will be difficult because it could impact farmers' incomes, and this law was backed by the FNSEA, France’s most powerful farming union.

Another farming union, the Confédération paysanne, is less convinced about the benefits of this law and, just as Mr Leclerc said, believes that it does not really lead to higher incomes for farmers.

Franceinfo stated that “behind this law there is a war of lobbyists”, with each actor defending their own profits.

The French government has been meeting each week with representatives of producers and retailers to try to come to some sort of agreement, but nothing concrete has so far been agreed.

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