A-INSIGHTS Report: Europe’s biggest food companies are not bearing their fair share of the inflation

Celina Kramer & Amandine Dayre
Published on
June 20, 2023

As the European Central Bank raised its interest rates to the highest levels seen in 22 years, the question of who does the most to control rising prices preoccupies everyone.

The food chain sector, in particular, has come under scrutiny. As the prices of essential items like potatoes (+19.8%) and eggs (+22.7%) skyrocketed over the year, people's trust in retailers and Fast-Moving Consumer Goods (FMCG) declined. In the Netherlands, a recent study highlighted that 85% of the population believed that the largest food players should tighten their belts and reduce prices for the benefit of consumers.

But are these players really motivated by greed, as the trending term greedflation suggests? Or are they doing their fair share to deal with the inflation problem?

In our latest report, we've analyzed the quarterly performance of some of Europe's largest retailers and FMCG companies. While the term greedflation doesn’t accurately represent the more nuanced situation those players are in, it appears that they’re indeed the main beneficiaries of these rising costs.

The largest retailers and FMCG companies are mostly benefitting from price inflation

While some players such as Ahold Delhaize or Mondelez claim that their margins have suffered due to cost inflation, a closer look at the latest quarterly figures tells a different story.

In fact, the largest industry players have seen a significant increase in their absolute profits, with retailers witnessing a +12%  rise and FMCG companies experiencing a +10.2% increase in Q1 2023 compared to the previous year.

Some clear winners:

Jeronimo Martins: +39% Operating Income YoY

Portugal-based retailer Jeronimo Martins has emerged as a standout performer. By absorbing some of the price pressure on consumers and offering competitive prices, the company achieved exceptional results. Its customer-centric approach paid off, attracting more customers and driving a 39% increase in operating income.

Mondelez Europe: +33.4% EBITDA

Contradicting recent statements from the company's CEO, Mondelez Europe, the company behind renowned brands like Oreo, LU, and Milka, experienced a significant boost in relative margins. Despite claims that their margins didn't grow with inflation, the company witnessed a +33.4% increase in EBITDA during the same period.

Curious to dive deeper into the performance of specific retailers and FMCG companies? Download our free report below.
Change in operating income and net sales Q1 2022 – Q1 2023

All in all, it appears that inflation didn’t put much pressure on the largest retailers and FMCG margins, suggesting that the pricing increase were mostly absorbed by consumers and smaller companies.

But a closer look reveals some losers from the situation

While the overall picture for European retailers and FMCG companies seems positive in those inflationary times, a closer look reveals some notable challenges. Several factors, including the Ukraine-Russia war, rising energy costs, and suspension of operations in Russia, have significantly impacted certain players in the market:

PepsiCo: the company suffered in 2022 due to the war in Ukraine, but managed to regain momentum in the first quarter of 2023 as it reported a €60 million profit.

Ahold Europe: The parent company of Albert Heijn, Etos, or Bol.com was summoned to testify before the Dutch House of Representatives (Tweede Kamer) in response to allegations of greedflation. However, Ahold Europe experienced a decline of -12.9% in operating income year-on-year in Q1 2023. Rising energy costs and strikes in Belgium contributed to the company's struggles.

Key takeaways

Our study reveals no apparent profit pressures on both retailers and FMCG companies, contrary to claims. Instead, it is the consumers and perhaps the smaller enterprises who feel the impact of inflation most acutely. Jeronimo Martins and similar companies may highlight their efforts, but the burden ultimately falls on the wallets of everyday individuals.

It may be tempting to label it as greedflation and blame retailers or FMCG companies entirely. However, the reality is more nuanced, as figures do not clearly indicate greedflation: some retailers and FMCG companies experience losses, while others emerge as winners.

Download our full report to gain access to more insights
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