BMI View: Following three years of stagnation, during which headline GDP growth averaged just 0.3%, we believe the French economy is poised for moderate consumer-led growth acceleration over the next two years. We now forecast real GDP growth of 0.9% in 2015 and 1.1% in 2016, up from 0.7% and 0.9% previously. In April, the consumer confidence index registered its highest level since November 2010, as French households appear to be benefiting from low oil prices and the associated boost to real wage growth. Given that consumer spending is the traditional driver of the French economy, this bodes well for growth momentum over the remainder of 2015. T he importance of the food industry for the economy and the fact that France is one of the few European countries with a growing, young population will leave food consumption growth relatively steady over the coming years.
Headline Industry Data (local currency)
2015 per capita food consumption year-on-year (y-o-y) = +0.7%; forecast compound annual growth rate (CAGR) 2014 to 2019 = +0.8%.
2015 alcoholic drink value sales y-o-y = +0.4%; forecast CAGR 2014 to 2019 = +0.8%.
2015 soft drink value sales y-o-y = +1.5%; forecast CAGR 2014 to 2019 = +1.9%.
2015 mass grocery retail sales y-o-y = +2.0%; forecast CAGR 2014 to 2019 = +2.2%.
Headline Industry Trends
Yoghurt Companies Fined For Price Fixing : In March 2015, France's competition authority fined 11 dairy companies a total of EUR192mn (USD203mn) for fixing prices on yogurt-related goods. Companies involved in the alleged price fixing included Yoplait, Lactalis and Senagral, as well as makers of most store-bought yogurt brands sold around France. The cartel was revealed due to a special procedure that permits companies to testify their own price-fixing activity to regulators in exchange for reduced punishment. Yoplait, owned by US-based General Mills, was the first company to report the activity and was thus exempted from fines, while Senagral received the biggest fine of EUR46mn (USD48.8mn).
Parliament Bans Unlimited Soft Drink Refills : The French National Assembly has voted for a ban on unlimited refills of sugary drinks at fast food chains and stores to help control growing obesity levels. The amendment was put forward by UDI MP Arnaud Richard and was supported by Health Minister Marisol Touraine. The ban would be applicable on all soda machines in public places and is aimed to reduce consumption of sugary drinks, which are perceived to be the major contributor to rising obesity levels. 'It is the role of the law to fix a framework to protect the population against commercial competition which aims to make something free to entice customers and encourage them to consume unhealthy products excessively,' the amendment to the health law stated, reports DBR.
Destroying Unsold Food Products Made Illegal : In May 2015, France made it illegal for supermarkets to destroy unsold food products, forcing retailers to sign contracts with a food waste charity to facilitate donations. The development comes after the country's parliament voted unanimously to pass the new law, which is part of France's ongoing pledge to reduce food waste by half to 2025. The new law will primarily target large food chains as their 'logistics and important stock' will make it easier for them to organise such donations compared with smaller shops.
Risks To Outlook
The main risk to our GDP growth forecasts, particularly for 2016, is political. If the Hollande administration takes concrete steps to reduce red tape, liberalise the labour market and reduce government consumption, we could see a significant uptick in business investment given the accommodative monetary conditions in the eurozone.