Europe’s supermarkets are having a terrible end to 2018 and are warning that new EU rules could lead to more expensive turkeys and Brussels sprouts next year.
Brussels on Wednesday agreed on sweeping new laws designed to help EU farmers fight off supermarkets, such as Germany’s Aldi and France’s Carrefour, and big food processors, which are accused of squeezing farmers.
The legislation was put forward by Commissioner for Agriculture Phil Hogan in 2017 to protect farmers against a list of so-called unfair trading practices such as abusive contracts and late payments.
While the plan was originally designed to help farmers, it was later expanded to take in mid-sized food manufacturers, with annual turnover of up to €350 million per year. Supermarket chains argue the legislation will do little to benefit farmers and will instead benefit food manufacturers that already enjoy higher margins than retailers.
The EU applauded the new rules as a significant step in ensuring that the most vulnerable sections of the food chain are better protected.
“For the first time, there will be a binding and detailed set of rules at European level that will curb unfair practices and protect small producers,” said Elisabeth Köstinger, Austria’s sustainability minister, who has negotiated the deal on behalf of member countries in the EU.
Mairead McGuinness, who sits on the European Parliament’s farm committee, said the new rules are essential to protect Europe’s struggling farmers. “There are many pressures on our food production systems and we have seen relentless pressure on our producers over the last decades,” she said.
EU countries still have to provide a final agreement on the text in January before it is fully adopted.
Supermarket chains point out that 95 percent of what they buy comes from processors and not farmers. Instead, supermarkets argue, retailers buy very little directly from farmers and deal with large processors such as Arla, Nestlé and Danone. Retailers also complain that margins among supermarket chains are down at only 1 percent to 3 percent due to extensive spending on wages, transportation and refrigeration.
The biggest disappointment for supermarkets in the rules agreed on Wednesday is that they give vast protections to not only farmers but larger food businesses with annual revenues of up to €350 million.
“I’m sure farmers will feel safer as they now have EU legislation protecting them. But do these unfair practices really occur between a farmer and a retailer? I’m not so sure. I think they would rather happen between a farmer and a dairy processor,” said Miriam Schneider of the Federal Association of the German Retail Grocery Trade. “Having said that, mid-sized companies now have the right to complain unilaterally without retailers being able to retaliate. That was what we were really fearing.”
Schneider also played down the significance of the law as 20 counties in the EU already have tough competition laws protecting farmers’ position in the supply chain. “This is not black and white,” she said.
Still, it is unclear what allowing businesses with a turnover of up to €350 million will actually mean on the ground. There was wide confusion among diplomats, industry officials and even lawmakers deeply involved in the file over what the precise impact of the agreement will be.
Neil McMillan, director of advocacy and political affairs at the Brussels-based supermarket lobby EuroCommerce, said that giving businesses with revenues of €350 million protections would mean that nearly all food manufacturers in some countries like Finland and Belgium would be covered by the rules.
“It is ill-defined, ill thought-out,” he said. “It’s going to put up consumer prices and it’s not going to help one farmer.”