Pump up the margins? Sonae CEO lashes back as criticisms mount over food prices
The CEO of Sonae, a Portuguese multi-sector multi-national company which operates one of the country’s largest supermarket groups Continente, has hit back as a tide of public resentment grows over the cost of an average weekly supermarket shop.
Cláudia Azevedo sent out a round-robin letter to staff at the group countering widespread claims that the supermarkets were cashing in on the current distribution and energy crisis with profits of up to 50% in some cases.
Critics say Sonae is just pumping up its margins, but the Sonae tycoon dismisses the idea that price food hikes are to do with taking advantage and cashing in.
“In recent times we’ve seen a campaign of disinformation in Portugal as to the causes of food inflation, with serious damage to the reputation of the food distribution sector”, she says.
And adds: “While its true that the level of inflation on food products has been much higher than overall inflation, the truth is that this is a global phenomena with causes that have been identified and associated with production chains. Moreover, this has been the position of the sector since prices began to increase and more sharply since.”
Azevedo stresses that that the hypermarkets and supermarkets are not responsible for inflation, and has again pointed out, as she did when the company presented its results, that the group has reduced its margins “to offset the increase in costs that “we too have suffered from”.
As the cost of living crisis has deepened, shoppers have turned to discount supermarkets such as Aldi and Lidl in a bid to save money. However, tight profit margins for these too have provided little manoeuvre on rising costs, prompting them to put up prices faster than their bigger rivals such as Continente and Pingo Doce in percentage terms.
The war in Ukraine has driven up the cost of many items including wheat, fertiliser, and animal feed, as well as global energy prices, leading to higher production costs in agriculture, food processing, packaging, warehousing and transport. It is these that have been passed on to consumers by some measure.
For its part, Sonae says that the group has come up with “solutions to help customers offset the effects of the cost of living crisis”.
The group also thanked its staff at a time when its “reputation is under attack” and underscores that the group’s decisions are “guided by values”.
On Thursday, the Minister of the Economy, António Costa Silva and Portugal’s food and economic safety watchdog ASAE held a press conference to unveil a strategy to understand why food inflation is above 20% when real inflation is 8.4% and has been falling in recent months.
ASAE has been monitoring the supermarkets and found cases in which gross margins were as high as 50%.
The Government is looking at measures in other countries to deal with the rise in food prices, with it stating that it will be “inflexible over pricing that appears to be “abnormal”.
In the first half of 2022, the Sonae Group saw profits increase by 89% with a net result of €118 million and sales of €3.4Bn to June.
Sonae MC, the holding company which owns Modelo Continente, closed 2022 with a business turnover of €5.9Bn, up 11.5% on the €5.3Bn it posted for 2021 – the best results ever.
Photo: Lusa – José Coelho