Paris, Oct. 23 - E.Leclerc on Tuesday joined the ranks of French supermarket groups denouncing demands by food producers for sharp price increases in 2008, and a legal framework preventing them from negotiating with suppliers.
E.Leclerc warned President Nicolas Sarkozy in a newspaper ad that price increases imposed by food producers threatened French households' spending power.
"Mr President, promising a rise in spending power means allowing prices to fall. Visibly, we got off to a bad start," the E.Leclerc ad's caption read.
The full-page ad, published in right-wing daily Le Figaro, featured seven products -- including mineral water, eggs, pasta, yoghurt or Camembert cheese -- with tags showing double-digit price increases due to come into effect at the end of the year.
"Enough with half-measures, small reforms and hackneyed phases: Inflation is back," said E.Leclerc, a family-owned group, which has made a name for itself with catchy advertising slogans promoting the rights of consumers and cheap prices.
Under French law, supermarkets cannot negotiate with suppliers directly about their retail prices, and instead negotiate "soft" services such as shelf space and promotional campaigns for specific products.
The revenue they receive for these services allows them to make a profit even if they sell products at less than they pay for them. However, price rises have put their margins under pressure.
Several supermarket groups, including retail giant Carrefour want the rules scrapped so they can freely negotiate prices with suppliers. Big suppliers want them maintained as it protects their pricing power.
Economy Minister Christine Lagarde, who was to hold a press conference spending power on Tuesday, told France Inter radio that there was a balance to be struck.
"We are trying to establish a balance between suppliers and retailers and, in particular, we want to allow retailers to pass along all the discounts they get from suppliers, which is not the case today," she said.
"Today I don't pity retailers. They keep a number of back-margins, discounts that they get from suppliers. Today we want these discounts to be passed forward to the consumer."
France's Secretary of State for Consumer Affairs Luc Chatel last week proposed a partial reform of the law before year's end and said the government would consider further reforms next spring. But in its ad, E.Leclerc said that would be too late.
"Prices have gone up and households' consumer spending will be affected from the first quarter of 2008," it said.
Big food suppliers such as Danone and Lactalis have announced steep price increases for November and December, citing the rising cost of raw materials such as milk.
Auchan recently said jam makers such as Materne were also seeking increases of 14 to 16 percent and brewers were demanding 4 to 8 percent extra for their beer.
Economists fear as a result French inflation -- which has remained moderate so far -- is poised to spike higher this winter.