Are milk producers the first winners of the Food Law?

What could be more symbolic than the Salon de l’Agriculture to mark the entry into application of an agreement aimed at increasing the price of milk paid to producers? Lidl France was not mistaken and chose its own stand – the wink is all the more powerful since it is located in pavilion 1, the one housing cattle farms among others – to highlight its partnership with Sodiaal, the leading dairy cooperative in France. Known by its brands Yoplait, Entremont and Candia, the cooperative collects 4.7 billion liters of milk and records a turnover of 5.1 billion euros. With this agreement, Lidl France undertakes to increase the price of milk to 356 euros per 1,000 liters for the base price, or 371 euros per 1,000 liters all premiums combined. And that on all volumes of milk, cheese and yoghurt for its private labels (private labels) and national brands distributed at Lidl France, ie 232 million liters. “The agreement clearly indicates the base price and the volumes, there is total transparency,” emphasizes Michel Biero, executive purchasing director of Lidl.

This partnership is part of a long list of agreements that have been actively highlighted in recent weeks. Lidl France has also recently committed with Lactalis to increase the price paid to producers of the food giant to 355 euros per 1,000 liters for the base price, or to 370 euros per 1,000 liters all premiums combined. Lactalis, with its Lactel or President brands, which has some 12,000 breeders linked to it, has also signed milk price revaluation agreements with Leclerc and the Envergure central which manages purchases for the Carrefour group and U Enseigne. This same central purchasing body which is also involved with Sodiaal, Yoplait and Laïta. Without forgetting the Intermarché agreements with Bel, Savencia and Sodiaal as well as with the agrifood division of the group, Agromousquetaires, itself in agreement with partner breeders for better remuneration of the milk sector… Admittedly, the announcements are flowing freely .

The milk crisis recedes

What to leave far behind the crisis that agitated the sector since 2015? “When agreements show a price of 370-375 euros per 1,000 liters, it is a much better price than that obtained over the past four years,” notes Dominique Chargé, president of Coop de France, which includes 2,400 cooperative companies. Much better indeed than the 260 euros per tonne paid in the midst of the dairy crisis a few years ago. “This price makes it possible to cover the production costs for many farms”, adds Dominique Chargé who recalls, despite everything, that some have made rather heavy investments. “As soon as we spend 350 euros per tonne, we can consider that the farmer can live,” adds Xavier Hollandts, economist specializing in agricultural issues and professor at Kedge Business School. “But production costs can vary from 300 euros per tonne to 450 euros depending on the farm”, he qualifies all the same. And the prices of milk have also risen.

This undeniable improvement – and these announcements that fell during commercial negotiations with large-scale retailers which ended on February 28 – would it be a first positive sign of the Food Law? Adopted in October, this law resulting from the States General of Food was intended to achieve a better distribution of value between producers, manufacturers and distributors. Is the bet won? “With the States General of Food and the Egalim law, we had a lot of hopes for a revaluation of the income of producers and their consideration”, recalls Dominique Chargé. “Objectively, things are going well for a sector.” That of cow’s milk. Even if the president of Coop de France emphasizes that the agreements only concern “15 to 20% of French milk production”. Because we must also have in mind the catering or export for example. “The negotiations related to national brands,” adds Dominique Chargé, specifying that private labels represent a large part of the volumes. And some distributors had announced their intention to lower the prices of their private label products in response to the increase in certain national brand products caused by this famous Food Law. “We remain on the alert,” says Dominique Chargé.

“The question of private labels is a real project,” confirms Damien Lacombe, president of Sodiaal Union, who hopes that the agreement with Lidl France – which covers national brands as well as private labels – will inspire other players. Because private labels constitute very large volumes for the milk sector. A stake far from negligible. At Sodiaal Union, the price ultimately paid to breeders reflects the cooperative’s product mix, i.e. 40% valued on the French market (branded products but also private label products in particular), 40% in BtoB, catering excluding home and European export and 20% on the world market. “If everyone played the game” like Lidl France, this could represent an increase of 20 euros on the base price of the part corresponding to the French market (40% therefore of the final price), estimates from the side by Sodiaal.

“Distributors must prove their good faith”

The Food Law and the debates surrounding it have created “a favorable context” but “we will have to maintain this context”, believes Damien Lacombe. These agreements on milk mark a step forward, a sign that behavior can change, wants Coop de France to believe. “Milk is the thermometer of economic health”, notes Dominique Chargé. Distributors were therefore not mistaken in communicating extensively on milk. “On the part of the distributors, it is on this product that we can make the simplest and most educational communication”, judges Xavier Hollandts since the link with the producer is strong. And as “the question of the remuneration of farmers has returned to the fore for two or three years, distributors must prove their good faith”, he supports. A change actually accelerated by the debates and the Food Law, but also by the development of producer organizations which weigh more in the negotiations at the very beginning of the chain and by the phenomenon Who is the boss, estimates the professor of Kedge Business School.

The “consumer brand” – so named since consumers participate in the specifications – was launched at the end of 2016… on milk. Out of a suggested retail price of 99 cents per liter, 39 to 41 go to the producer. The success of C’est qui le patron, although its sales only represent a drop in the volumes of drinking milk sold in France, has helped to get distributors and national brands to commit to this revaluation of the prices of milk. Intermarché notably launched the “Breeders say thank you” range, claiming that half the price of a carton of milk is donated to breeders, ie 44 cents per liter. In 11 months, more than 19 million liters of milk have been sold, says the distributor.

But if milk is in the spotlight, what about negotiations in other sectors? “It should not be the tree that hides the forest”, warns Dominique Chargé who indicates that “the situation is not the same in the other sectors” and notes little change during the negotiations compared to previous years , whether for the cereals, meat or fruit and vegetable sector. And Dominique Chargé even reports “an alert situation for beef and pork”. “Those who stick their tongues are the meat producers,” confirms Xavier Hollandts, who wonders if the Polish meat scandal will help make things happen. What if it had already started? Lidl France did not skimp on this message at the Salon de l’Agriculture by chaining the signatures and renewals of tripartite agreements (producer, processor, distributor) in this sector. Here too, to ensure better remuneration for breeders.