Richa Naidu, Jessica DiNapoli

LONDON/NEW YORK – Shoppers are paying more for everything from coffee and ketchup. Some retailers have begun to lower the prices of hundreds of items to compete for customers.

Eurostat reported Friday that the eurozone inflation rate for food, tobacco, and alcohol rose 6.4% in April, against a 5.5% rise in March. This is due to rising living costs in Europe, which goes beyond energy.

Leclerc is France’s most popular retailer according to market share. On Tuesday, the head of the company said that the firm would determine the top 120 consumer products, like toilet paper and soap. Then, Leclerc will create a shield where they guarantee the cost of the items for a period of four months from May 4, through July 7.

Prices have increased anywhere from 6% to 20%. Michel-Edouard Leclerc, a French radio broadcaster, stated that Pasta has seen a 20% increase, along with some chocolate and coffee brands, in an interview.

European governments were facing election this year and spent millions of euro in March to provide shelter for households.

Although there is no indication that they will provide similar assistance for food bills (which are less than half of domestic spending), politicians are concerned as household incomes shrink and consumer groups have advised the poorest to make tough choices about heating or eating.

Supermarkets are trying to retain customers as they have seen flat margins in recent years.

According to Sainsbury’s, the CEO of British supermarket chain Sainsbury’s, shoppers “regard every cent”.

The analysis of a diverse basket of goods made for Reuters by Nielsen by the data firm Nielsen shows sharply rising prices, with many of these increases exceeding last year.

Europe’s shoppers pay about 2 euros ($2.10) less for six basic food items, an increase of 8% over last year. On average, retailers charged 8.6% more to buy instant coffee during the four week period ending March 26th. Baby milk prices rose by over 21%.

SHIELDS and PRICE CUTS

Leclerc promised that prices would be frozen in Europe. However, many retailers want to minimize inflation on essential products.

EuroCommerce is the spokesperson for European wholesale and retail trade organization EuroCommerce. It has over 95 members. Carrefour (EPA:), Lidl and Marks & Spencer (OTC:), said all were looking at price caps and cuts in some form, although it would depend on input costs on suppliers’ margins.

The spokesperson stated that prices will be kept down because of the competitive market for grocery stores.

Surging prices in Britain have caused the greatest squeeze on household incomes, at least since the 1950s. Groceries price inflation reached 5.2% during the four-weeks to March 20th. This is the highest since April 2012 according to industry data.

Asda, Morrisons and other supermarkets in the area have reduced prices on essential products.

They may have an advantage after the lockdowns since people are more likely to eat at home, which gives them a buffer. But analysts predict that full-year margins will be flat or declining at European retailers such as Colruyt (OTC), Sainsbury’s and Colruyt.

They intend to try and recover the price cut impact in hard negotiations with the food companies. These usually would have ended late last year in some parts of Europe but have dragged along because supply chain problems, inflation, and the Russian war in Ukraine have complicated agreements.

Mondelez and Unilever, two of the largest packaged food companies in America (NASDAQ:), are looking to raise their prices. Their margins have been shrinking while input prices have increased due to record commodity costs.

Unilever, the company that makes Knorr chicken stocks and Hellmann’s mayonnaise said Thursday it increased prices in Europe by 5.4%. This equated to 0.7% growth in quarterly underlying regional sales.

However, the company forecasts that its first-half margin will be between 16%-17%. This is down from 18.8% in last year.

Alan Jope, Chief Executive of the company said that if you look at what is happening with people’s energy bills it would be quite comparable. Company warned about price increases and stated that it would not charge more unless the input cost was higher. This would have a negative impact on its margins for full year by 900 basis points.

Dirk van de Put is the CEO of Oreo-maker Mondelez. He stated last week that they were approaching European retailers about a price increase after raising prices earlier in the year.

According to the company, Mondelez reported that its first quarter margin dropped from 41% to 38.4%.

Nestle, world’s largest food manufacturer, stated last month that it expects to increase sales by around 5% in 2015 due to higher prices for pet food, milk, and coffee.

While food manufacturers are seeing increased sales, some of their branded products are being outperformed by private-label products like Aldi. Due to the threat of shortages in Ukraine, consumers are increasing their stockpiles.

Rolf Buyle (managing director international buying, ALDI Nord) stated that sales are higher for all brands as well as across all categories. We have stockpiling results in the pantry category, such as flour, oil, pasta and rice.

Unilever, Nestle and other companies declined to comment on this story. Mondelez didn’t respond to our request for comment, and Leclerc couldn’t be reached.

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