Mondelez is involved in a price dispute with Belgian supermarket chain Colruyt

Chocolate producer Milka has been accused by a supermarket group of violating the terms of a one-year agreement.7

Belgian grocery retailer Colruyt is opposing Mondelez International’s demands for further price increases for its products.

Colruyt has accused the Milka chocolate and Oreo biscuit maker of violating the terms of an annual agreement between the two parties. Mondelez said it was trying to cope with “unprecedented, dynamic market conditions”.

The dispute led to the absence of Mondelez products on Colruyt’s shelves.

Last month, Mondelez said it planned further pricing actions in Europe despite easing inflationary pressures and some resistance from retailers.

The food and beverage maker’s efforts to raise prices have been met with resistance from some supermarket groups, which are concerned that it could drive consumers away and force them to choose cheaper competitors, especially German discounters.

In a statement sent to Just Food, Colruyt said it does not agree with Mondelez’s new demand for higher prices for its products.

“Our supplier Mondelez, which supplies brands such as Lu, Oreo, Milka, Belvita, Côte D’Or, Stimorol and Philadelphia, has an annual agreement for the entire year 2023. Despite the agreement, Mondelez has informed us that it wants to make another significant price change,” the statement said.

“We believe it is extremely important to look at this very critically, because we are the link in the chain that should protect consumers’ wallets, especially as the lowest-priced player.”

“Last year, the exceptional situations were the increase in energy prices and the rise in commodity prices. It was clear then that exceptional situations require exceptional measures, and so we sat down with our suppliers to see how we could work together to ensure that each link in the chain contributed in proportion to its capabilities, and we as a group were interested in making sure that this remained feasible for our suppliers as well.

“Today the situation is completely different, and a significant increase in rates is no longer justified for us.”

Currently, no new deliveries of Mondelez products to the Colruyt and Okay chains are being made.

“We will do our best to resolve this situation. However, we stand by our position that we want to protect our customers’ wallets first and foremost, and this remains our top priority,” the retailer insists.

Mondelez said: “As the negotiations with Colruyt are not yet finalized, some of our products are temporarily unavailable at Colruyt. Together with Colruyt, we will continue to look for solutions so that consumers can find their favorite products on the shelves again.”

But defending its position on further pricing actions, the company said: “Like many companies in the food and retail sector, Mondelez is facing unprecedentedly dynamic market conditions. Costs have risen significantly and unfortunately are impacting our company as well. Like all companies, we are trying to cope with cost inflation, supply chain and labor dynamics.

“We recognize that consumers are also facing rising costs, so we are trying to cover those costs wherever we can, but in this dynamic environment, we have decided to make some selective price increases in our categories.”

Mondelez and Colruyt financial statements

In the three months to March 31, Mondelez’s net revenue increased by 18.1% to $9.17 billion, driven by a 19.4% increase on an organic basis. he company reported that its underlying volume/mix was up 3.2%. Its net profit amounted to $2.08 billion – up from $855 million a year earlier – but its gross margin declined from 38.4% a year ago to 37.6%.

After the wake of its first-quarter results, Mondelez said it expects its organic net revenue to grow by more than 10% in 2023, compared with its previous forecast of 5% to 7% growth, and its profit to grow by more than 10% in constant currency, compared with its previous forecast of single-digit growth.

Last week, Colruyt predicted that its “consolidated net result” in fiscal 2022/23 would be “strongly to significantly down” from the previous year, when it stood at €288 million ($314.6 million). he year-on-year decline is not expected to be as steep as in the first half of the fiscal year.

Colruyt pointed to an increase in its market share to 31%, “greater attention to controlling operating costs”, as well as “focus on energy efficiency and lower than expected energy price increases”.

Colruyt’s fiscal year 2022/23 ended on April 1, and the company is expected to report its annual results next month.

It is just the latest spat between manufacturers and retailers over pricing.

Last summer, British grocery giant Tesco sparred with U.S. food producer Kraft Heinz over its attempts to raise prices, and Tesco chairman John Allan later accused some food producers of using inflation as an excuse to raise prices.

In February, it was reported that the American retail giant Walmart responded to price increases provoked by manufacturers.

In March, Dutch retailer Jumbo rejected planned price increases from major food producers, including Nestle and Mars.