French retailer Systeme U to discount food goods in pricing battle

By Sudip Kar-Gupta and Bertrand Boucey

PARIS (Reuters) - French supermarket chain Systeme U will discount prices on food items from October until the end of the year, it said on Wednesday, ahead of price talks between retailers and consumer goods groups that are being brought forward by the government.

The French government is pressuring supermarket groups and consumer goods companies such as Nestle and Unilever to cut prices to cushion the inflationary pain on households.

The retailers have criticised the consumer goods giants for price hikes they say are unjustified.

Dominique Schelcher, the head of Systeme U, France's fourth biggest supermarket group by market share, offered a 10% discount on food products at his stores for two days every two weeks from late October through to December. He said that he expected consumer goods groups to be pushing for a similar double-digit increase in negotiations.

"There has been a call for goodwill, but the major industrialists, the very large ones that are often based abroad, have not wanted to play the game," Schelcher told RTL radio.

Representatives of the food industry told French lawmakers last week that production costs remained high and manufacturers had absorbed a significant part of the inflationary shocks.

Campaigns in France to publicly shame multinational consumer groups were unhelpful and could dissuade multinationals from investing in France, Miloud Benaouda, board member of food industry lobby group ANIA, told lawmakers.

The retailers and consumer goods groups will have to wrap up the price negotiations by Jan. 15 instead of the traditional March 1 deadline under a bill the French government is sending to parliament on Wednesday.

French law stipulates a three-month window when such negotiations can take place - usually between Dec. 1 and March 1 every year.

However, a 10% average increase agreed for this year has locked in high prices in French supermarkets even as global food commodity prices have tumbled.

Michel-Edouard Leclerc, chairman of France's leading retailer E.Leclerc said his group's low-pricing policy was winning market share.

"We are doing very well, because we are selling at cheaper prices," he told France Info.

(This story has been corrected to remove the reference to 'shrinkflation' in relation to Benaouda's remarks on the campaign to shame consumer goods groups in paragraph 7)

(Reporting by Sudip Kar-Gupta and Bertrand Boucey, Writing by Richard Lough, Editing by Louise Heavens)