Supermen break silence before farmers protest: why do tomatoes grow?

Protests by Spanish farmers Recent weeks have once again put the consumer sector in the spotlight. supermarketsstated the enemy is on the left and in most of the main sector. Allegations of food speculation, price gouging, strangling farmers or gobbling up local businesses have resurfaced during this conflict, which this Wednesday involves hundreds of tractors in Madrid. After many days of silence (except to ask “free movement of goods and people” during protests), large networks wanted to express their version.

One of the arguments most often used by critics of supermarkets is large price differences that produce suffer when they leave the field until they hit store shelves in perfect condition. The first thing to keep in mind in this regard is that this differential does not go directly into the dealer’s pocketbut is distributed among a long list of intermediaries who add value to the product, as recalled by the National Association of Large Distributors (ANGED), an employers’ association of companies such as El Corte Inglés, Eroski or Alcampo.

“Products on the shelves are more expensive because there is a combination of services and value for the consumer: classification, transportation, storage, inventory management, waste prevention“cold chain, food safety control, packaging and presentation or consumer information,” they list.

5 billion taxes and low margins

Anged recalls that the food distribution (super and hyper) has a network of more than 25,000 stores in Spain, serving 400,000 people. Therefore, “it is necessary to add some costs such as rent, wages, energy and materials, security, cleaningetc.”. All this must be added to the payment taxes, salaries and contributions. According to this association, 21 companies that are part of it Last year they paid 4.930 million euros in taxes and 7,150 euros in salaries and fees. in Social Security.

As we have already explained in Libre Mercado, the supermarket sector is a very competitive sector with low profits and bases its business on volumes (many inexpensive goods are sold). The huge turnover of these companies makes the business sustainable (profitable).

According to calculations by the association of employers representing El Corte Inglés or AlcampoOn average, large distribution companies have a net return on sales of 2.5%. This, For every 100 euros deposited, the final profit is 2.5 euros.. “The last line of the income statement measures net sales profit. That is, what remains in the company after deducting all costs and taxes,” they explain.

“Distribution companies build their business on gaining market share and sales volume relative to their competitors. For this, the main tools are, on the one hand, invest in discounts, promotions or your own distribution brands; and on the other hand, achieve efficiency through strong investments in technology, improvement of all processes and continuous innovation in management,” they add.

Not all agricultural products end up in the supermarket

In addition to myths about the profitability of their business, distribution employers also wanted to clarify that they are not the only clients of farmers. “Average, about 50% of agricultural products are sent directly for export. Secondly, there is the emergence of the food industry, and then the distribution channels for fresh food, which include organized distribution, markets and wholesalers, traditional trade and Horeca (hotels, restaurants and cafes).

Connected

A 31.4% of total food expenses are spent in restaurants, bars and cafes.“, they note. “Companies like ANGED, due to their size, buy mainly from cooperatives and large producers, who represent the most organized part of the sector, ” they say.

The absurdity of the food chain law

It’s not like that in supermarkets though. ruthless with farmers, as they are drawn, PP and PSOE did not hesitate to implement different rules in the value chain. food. The most popular is Law of the food chain. “Spain was one of the first countries to introduce this type of legislation, adopting the so-called food chain law in 2013,” recalls Fedea in a study published last Monday. This rule has changed several times in recent years.

Among the changes made to the text are prohibition of selling at a loss, requiring by law that prices at least cover production costs throughout the entire food chain. However, this regulation has failed miserably precisely because this basic goal cannot be achieved, since it is very difficult to determine the exact costs that need to be covered.

Moreover, as Fedea highlights, production costs below the selling price are normal in any manufacturing sector, “as those operators that cannot cover their costs on a regular basis will eventually be forced to close.” However, the attempt to impose this condition always and in every transaction “seriously interferes with the logic of the market, nullifying its mechanism of natural selection.” Fedya is also perplexed”Why is this law only for farmers? How are they any different from owning a corner bar or any other business for these purposes? and, furthermore, they point out that “it is impossible to force food buyers to enter into contracts with the least efficient producers, paying above-market prices to cover the latter’s costs.”

The only possible formula for complying with this law, which Fedea considers “although not necessarily desirable,” is that the public sector will take on the role of buyer of last resort guarantee the right of food producers to sell at a certain price.” harm to consumers“that they will have to pay more for food” and taxpayers“which must finance the purchase and storage of large surpluses of agricultural products”, as well as damage to “certain countries with lower incomes than ours, which we supposedly want to help developbut then we deprive them of the opportunity to use their comparative advantages in agricultural products to do this.

Demonized by the government

The truth is that Spanish supermarkets are under the government’s radar ISOE And Maybe since the start of the inflationary spiral. “Looters”, “speculators”, “wild capitalists”… since the days of Podemos, insults have become frequent. However, the socialist wing of the Sánchez government also contributed to the takeover measures that cause significant harm to the industry. The Anged identifies three types and an endless list of rules in recent years:

1. More taxation: a new tax on plastic, an increase in the tax on food refrigeration gases, an increase in social contributions, VAT surcharges on sugary drinks and a tax on large commercial enterprises in the five autonomous communities.
2. New investments in environmental issues: packaging reuse obligations and return services, 20% store reserve for bulk or refill sales, packaging avoidance targets stricter than the European Directive, mandatory electric vehicle charging points 2 years before EU accession and differentiated ticket prices for some packaging.
3. New management costs: Registration and registration of containers, non-EU-compliant labeling, use of official languages, different CCAA carbon footprints, urban logistics constraints, disparate organic requirements and more.

In this sense, it is amazing that the Government failed to discredit supermarkets even by the Observatory itself, which it created together with Bank of Spain And The tax service faces escalating inflation. It turns out their final finding was that farmers were increasing their profits, not crowding them out.