Agriculture, Fisheries and Food Minister Luis Planas believed food inflation had peaked during his latest official briefing with industry representatives. He trusted the VAT cut on several basic food items would curb prices. The regulation, which took effect at the start of the year and appeared to show progress in January, slows price rises for now. Yet data released by the National Institute of Statistics INE on Tuesday left little doubt: prices are 16.6% higher than a year earlier, a gap that is one point wider than in January. For now, the government is not making any change in approach, and there is no sign of tools like a public app that would signal upcoming negotiations with the industry. A limited price shopping cart as agreed in France or a cap on prices discussed in Portugal has not yet materialized. And while those nations often receive supermarket support, most major players in Spain remain skeptical about such measures.
Until this Tuesday, the opposition was largely private. “If the final price of food is set, it only chokes the last layer in the chain”, a senior official warned this week. One of the leading Spanish supermarkets echoed that concern. “We’re already feeling a huge impact on margins”, said a spokesperson for another chain. “It’s an illusion, it’s impossible: it’s all about supply and demand, and other players will weather the storm.” On Tuesday, Mercadona’s CEO, Juan Roig, spoke publicly and with no hedges. The clear message was that a batch of items at a discounted price is not feasible in Spain. Carrefour has attempted a few months of similar moves, and the erotica group plans to reveal changes this Thursday, but most players prefer continuing the strategies they have used—occasional discounts and personalized offers.
The increase in CPI puts pressure on the Government to take new measures regarding food prices.
Mercadona, for example, has implemented a tool dubbed to calculate each product’s profitability and hence refine, enabling cost-focused targeting. Carrefour announced a subscription offer called Carrefour+ that theoretically grants a 15% discount on fresh produce; it uses a supermarket card for access, benefiting around 80% of shoppers in that chain, and allows activation of special offers, while strengthening loyalty with periodic discounts.
What France announced is not new. Spanish retailers have invested in offers and discounts for months. ANGED, the national association representing major distribution companies, notes that Carrefour and others are already pursuing campaigns with the same aim, often sacrificing margins in the process. Aurelio del Pino, head of ACES, the supermarket sector association, adds that these moves are common across the industry, driven by margins that they are willing to adjust for ongoing promotions.
cost transfer
Ernst & Young conducted a study referenced by both employers and policymakers. It indicates that prices in supermarkets have risen less than in other parts of the supply chain. The study suggests that producers and farmers paid on average 33% more for inputs last year, yet sold products only 23% higher, with distribution margins around 16% higher than in 2021. The takeaway is that the chain’s participants will either narrow margins or pass costs along to consumers.
The analysis also notes that the industry has stagnated for years. Average profitability across the sector, including investments, sits around 1.5%. Feed manufacturers have faced mounting costs. A report from the economic desk of CCOO based on Bank of Spain data partially exempts supermarkets from price rises, showing that the place with the largest margin increases is in wholesale. Only about 20% of the problem is seen at the final retail point.
financial results
Currently, the quarterly earnings of Spain’s largest supermarket groups do not provide definitive conclusions. Carrefour has not published its Spanish earnings for the year’s end; Lidl has not disclosed; Day has posted losses in recent years but reduced them by nearly half from 250 million to 124 million in 2022; BonPreu, runner-up in Catalonia, has yet to publish figures.
Mercadona remains a key benchmark due to its leadership and sizable market share. It reported that inflation drove up annual bills by 11% to around €31 billion, even as costs rose by about €500 million and net profit fell by roughly €140 million compared with 2021. Nonetheless, the group finished the year with a profit of €718 million, up about 5% from 2021.
Industry voices in Spain say costs, not margins, are the core problem. They point to higher raw material costs driven by factors such as the Ukraine conflict and new regulatory charges, noting that as these pressures ease, inflation should ease as well. Still, the managing director of ACES emphasizes that Spain’s response is stronger than in many other European countries, supported by a competitive distribution sector and vigorous competition that helps keep efficiency high.
At the end of the day, the consensus is that Spain faces a cost squeeze rather than a simple toll on profits. The sector will continue to adapt, using promotions and loyalty programs to keep prices under some level of control while inflation gradually cools off.