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Food FMCG: “The Pie Has Stopped Growing!”

17/08/2026
14:18

reading time : 2 min

Lucie Monnot

Content Marketing Manager

Organized by Nomadia, the Sales Force Breakfast held on 12 October devoted significant attention to analyzing the FMCG market and the challenges facing food industry manufacturers in a context marked by declining sales.

Revisit the event, which highlighted the trends to keep in mind when preparing your strategy for 2024.

An outlook shaped by inflation

Yes, overall inflation is slowing. According to the Bank of France, it was expected to continue declining in 2024 and stabilize at around 2.5% in 2025.

In the meantime, however, consumption is not recovering. It is actually at its lowest level, both in value and volume, in the food sector, where prices have increased by more than 20% in two years.

For a basket of 150 “star” food products, the total checkout bill increased by 26.6% between February 2022 and July 2023.

Source: A3 Distrib, NielsenIQ.

During the same period, salaries increased by only 4.5% on average, according to INSEE. This has had a decisive social impact on manufacturers and retailers.

“Food inflation is creating a sense of downward social mobility because French consumers are effectively experiencing a decline in purchasing power. Beyond the statistical reality, it is consumers’ perception of the situation that creates this feeling of downward mobility, which in turn drives the changes in purchasing behavior observed in stores.”

Olivier Dauvers

Faced with declining purchasing power, households are making trade-offs at three levels.

Choosing between retailers

Consumers are turning to retailers with the strongest price image.

This helps explain the growth of E. Leclerc, whose value market share has increased by more than one percentage point per month since April 2023.

“This is a level of growth we have never seen for such a long period in more than 30 years.”

Trading down on quality

Consumers are moving away from national brands in favor of private-label brands and then entry-level products in order to preserve the quantities they buy.

“Premiumization, through organic products and branded products, was the number one growth driver for ten years. In 2023, we are seeing unprecedented trading down, at least compared with the last ten years. Private-label brands gained 0.9 percentage points of market share, while entry-level products gained 0.6 points. Combined, they accounted for more than 43% market share during the first three quarters of 2023.”

Nicolas Léger, Analytics Team Director, NielsenIQ

Reducing quantities

Consumers are also making trade-offs regarding quantity, with a catastrophic impact on volumes.

After reaching a peak during the COVID-19 period, volumes have fallen back to 2014 levels, even though annual spending per person increased by 13.4% over the same period.

Source: NielsenIQ.

It is worth noting that these trade-offs no longer concern only the lowest-income households.

These households adapted in 2022 and, having almost nothing left to cut back on, now have very little room for maneuver.

In 2023, upper-middle-class households began reducing their purchases of FMCG and self-service fresh products, with volumes down 3.4% compared with 2022.

Source: NielsenIQ.

A risk of lasting reduced consumption?

It is an understatement to say that the term “reduced consumption” concerns the retail sector.

Retailers’ reactions to the recent Ademe campaign featuring a “de-seller” demonstrate how sensitive the issue is.

However, there is a significant difference between voluntarily limiting purchases of clothing or household appliances for environmental reasons and being forced to reduce purchases of essential food products because of a lack of financial resources.

Nevertheless, one-third of French people have reached this point, while three out of four say they are struggling to make ends meet.

Source: Apinio/LSA study, August 2023.

In food, French consumers are reducing consumption because they have no choice.

Believing that food consumption will quickly recover as inflation begins to slow is an illusion.

This would require a drastic recovery in purchasing power, driven by much more substantial salary increases and more generous social measures.

However, such measures are not currently on the agenda in France because of fears of triggering an uncontrollable price-wage spiral.

This price-wage spiral is even less relevant because the existence of a price-profit spiral is becoming increasingly well established and has been confirmed by both the IMF and the European Central Bank.

Food prices have risen excessively because manufacturers took advantage of the situation to restore their margins, particularly by failing to pass on reductions in food commodity prices that occurred from summer 2022 onward.

The price increases introduced in 2022 broadly reflected higher production costs for manufacturers, including raw materials and energy, following the outbreak of the Russia-Ukraine conflict.

The increases introduced in 2023, however, have been considered unreasonable given that the profit margin of food-processing companies reached its highest level in 30 years, at 48%, compared with 28% at the end of 2021.

Prices urgently need to come down

The margins of large companies and retailers account for half of the food inflation experienced by households.

They are therefore contributing to forced reduced consumption, a situation that cannot continue without serious risks.

These risks include social unrest, because access to food is essential, and a collapse in sales throughout the industry, including manufacturers and retailers, because customers may no longer have sufficient purchasing power.

For food consumption to recover, there is only one short-term solution: food prices must come down.

And they must come down quickly.

This was the message delivered forcefully by Olivier Dauvers to the FMCG and self-service fresh product manufacturers attending the breakfast event.

“It would be better for prices to come down, otherwise we will see another Yellow Vest movement. The entire industry has a social and business responsibility in this regard. I hope you do not imagine for a moment that demand will remain at its current level if prices remain where they are today.
You will have to find solutions. Otherwise, brands will become luxury products, and the brands you represent will no longer be mass-market brands, but niche-market brands. Private-label brands will become the core of French consumers’ food purchases.
It must be said clearly: there is currently a form of collective irresponsibility regarding food prices.”

However, for demand to recover, prices must fall globally, significantly and sustainably.

A reduction of two or five cents on a few “price-locked” products may represent an effort for manufacturers and retailers, but it will not make a meaningful difference to consumers at the checkout.

A general price reduction is not currently being considered.

According to the latest statements from the president of Ania, the French National Association of Food Industries, prices were expected to stop increasing in 2024, but not to decline.

Most manufacturers entered annual negotiations with large-scale retailers with higher prices. This effectively shifted responsibility for reducing shelf prices to the retailers.

The government and retailers had hoped that bringing the annual negotiation deadline forward to the end of January would help reduce prices. However, this measure is unlikely to deliver the expected results.

The elephant in the room

It is entirely logical that inflation and its consequences are at the center of the concerns of FMCG stakeholders.

However, these short-term issues must not distract from longer-term structural trends that are crucial to the future of large-scale retail and its suppliers.

The elephant in the room, the reality that is not being taken sufficiently into account, is that overall consumption in France has grown by an average of only 0.4% per year since 2008, compared with 2.6% before 2008.

“This means that the ‘pie’ you all share, manufacturers, suppliers and retail partners, has not grown for 15 years.
When the market grows by 2% to 3% per year, everyone moves forward, even the weakest players. When it grows by only 0.4%, as has been the case in France for the past 15 years, it becomes harder to remain profitable and easier to fall into the red.”

Olivier Dauvers

The decline in demand is explained less by short-term economic fluctuations than by demographic trends.

France’s natural population balance fell by a factor of 4.7 between 2014 and 2022, and the number of births is on course to be overtaken by the number of deaths.

As a result, the French population is stagnating and aging.

The impact on food consumption is both predictable and long-lasting. Year after year, there are fewer new mouths to feed and more older people who require fewer calories.

This is why the “pie” is no longer growing.

Despite this reality, large-scale retail continues to increase its food retail capacity by adding more floor space, particularly for drive-through and click-and-collect services.

Retailers are also extending Sunday opening and, in response to e-commerce competition, gradually reducing the size of their non-food departments.

The combination of three undeniable realities, structural consumption slowdown, e-commerce growth and increasing retail supply, leads to an obvious conclusion: sales productivity is declining, weakening the very model of French food retail.

These may seem like gloomy prospects.

However, successful strategies cannot be built by denying reality or ignoring opportunities.

There are opportunities for FMCG companies that know how to analyze consumer behavior and local market potential in depth.

This is what our analytics and geomarketing tools, as well as our field sales force optimization solutions, are designed to support.

We promise to explain all of this in a future article.

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