On July 3, the Antitrust Council published opinion no. A/1/25 on the state of competition in food distribution channels in Morocco, adopted at its 60th meeting on February 27. Following this self-referral, the Council analyzed in detail the pricing mechanisms that weigh on consumer prices and contribute significantly to food inflation, which is set to rise to 11% in 2022 and 12.5% in 2023, levels not seen for thirty years.

While external shocks such as the pandemic, geopolitical tensions and rising logistics costs have triggered price rises, according to the Antitrust Council, this inflation has been accentuated by the specific characteristics of the Moroccan distribution system.

In other words, while external factors triggered the price surge, the specific structure of Morocco’s distribution channels helped to aggravate and amplify the inflationary trend.

The traditional trade, which still accounts for some 65-75% of volumes for dairy products and 77% for triangular processed cheese, applies quasi-uniform prices, limiting any real differentiation according to purchasing costs.

At the same time, supermarkets and hypermarkets have seen the spread of « back » margins (marketing services, off-invoice discounts), whose average weight varies between 6% and 16% depending on the product category.

Distribution channels decoded

In the traditional channel, wholesalers play a predominant role. For example, they capture up to 65% of volumes of triangular processed cheese, thanks to the absence of conservation constraints and the importance of batch sales.

These professionals then supply local retailers and grocery stores – who apply an almost uniform price per portion, set at 1 dirham regardless of packaging or brand in the case of triangular processed cheese. This uniform practice, which applies to several food products, eliminates all price competition in these segments and establishes a robust distribution rent, to the detriment of the end consumer.

The modern distribution channel, embodied by supermarkets and hypermarkets (GMS), operates according to a dual margin logic: « front » and « back. » The front margin corresponds to the difference between the supplier’s transfer price and the selling price displayed in the store. To this is added the « back » margin – off-invoice discounts, marketing services or sales cooperation – which, stabilized at between 8% and 15% for most suppliers, sometimes represents more than half of the overall margin (up to 60% for some chains).

Overall, the gross margin on a dairy product, for example, averages 20-25%, and can exceed 30% for butter and certain cheese formats.

Focus by product family

In the dairy products segment, UHT and pasteurized milk have an overall gross margin averaging between 14% and 21%, with relatively stable back margins (6-7%) and front margins ranging from 7% to 20%, depending on the brand.

For the butter market in general, all types taken together, 30% is produced locally, while 70% is imported (13,400 tonnes in 2023). The average back margin is around 9%, while the front margin is around 11%, giving this product an overall gross margin of around 20%.

Triangular processed cheese, with annual sales of 50,000 tonnes and 2.5 billion dirhams, is dominated by Fromageries Bel (around 40% market share), followed by Centrale Danone (30-40%) and Margafrique (10-20%). Standard formats (8 and 24 portions) show gross margins of around 15-17%, i.e. 1.33 dirhams for 8 portions and 5.4 dirhams for 24 portions. As for large packs (64 and 96 portions), the gap between transfer price and selling price reached 36 dirhams/lot (50-61%) in 2021, before narrowing to 12-31 dirhams/lot (22-49%) in 2023, due to the increase in the supplier price without any revision of the psychological price of 1 dirham per portion.

In the couscous and pasta segments, margins differ according to product type: for fine and medium couscous, the front margin will increase in value from 1.16 dirhams to 2.91 dirhams per pack between 2021 and 2023, depending on chains and brands, while the back margin will remain stable at around 12-16%, for an overall gross margin ranging from 25% to 40%, depending on channels.

Pasta, consumed at a rate of 3.5 kilograms per inhabitant per year, has average front margins of 8-17%, rear margins of 6-7% and an overall gross margin of around 15-21%.

Finally, the vegetable preserves family – tomato paste, jams, canned vegetables – stands out with a higher average back margin of around 10.6%, while front margins generally fluctuate between 5% and 15%, depending on the level of added value and brand strength. Overall, the gross margin on these products averages 20-30%, reflecting the strong rent capture possible at every stage of the value chain, according to the Council.

Imbalances and barriers to competition

The opinion also highlights the extent of disparities between chains, a major obstacle to fair competition: some chains partially absorb the rise in purchasing costs to build customer loyalty, while others maintain high front margins, reinforcing their profitability to the detriment of the consumer.

At the same time, back margins, which are not very transparent, fly under the regulatory radar, widening the inequalities in negotiations between manufacturers and distributors. Small and medium-sized agri-food businesses, less able to renegotiate, are subject to back margins of up to 11%, compared with 8% for major brands.

To rectify the situation, the Council is first proposing a stricter framework for back margins, by introducing a ceiling on applicable rates and imposing systematic traceability of all off-invoice discounts. The aim is to make these practices more transparent and limit their impact on the final price paid by the consumer.

To enhance the visibility of pricing mechanisms, it recommends the creation of a public observatory of industrial and in-store selling prices, accessible to SMEs and consumers alike. This centralized platform would make it possible to monitor price trends and detect any deviations more quickly.

Aware of the importance of traditional trade in supplying the population, the Council also recommends support for its modernization: specific training programs, support for the digitization of sales outlets and subsidies for setting up shared logistics platforms. These measures are aimed at strengthening the competitiveness of small retailers in the face of major chains.

In addition, to deter anti-competitive practices, the French Competition Council recommends tougher penalties and more systematic prosecution of cartels and abuses of dominant positions. A more rigorous application of competition law is deemed essential to break the logic of rent-seeking and guarantee a fairer market.

Written in French by ElMehdi El Azhary; edited in English by AngloMedia Group.