A report from credit ratings company Moody’s has warned that French grocery retailers are faced with threats to their market because of elevated “structural challenges,” rising online gross sales and competition from retailers such as specialist meals providers, natural grocers, and discounters.

And the French government plans to ban “buy one, get one free” offers on food products in supermarkets to guarantee better income to farmers struggling, according to Reuters in February.

The move is part of a broader food and farming bill, presented to the cabinet, which aims to raise regulated minimum food prices and limit bargain sales in France, the European Union’s largest farm producer.

Farmers, an important constituency in French politics, have long complained about being hit by a price war between retailers that they say benefits consumers but hurts producers.

“It will be a breath of fresh air for retailers, who will be able to trim their margins on other products and pay producers better,” Agriculture Minister Stephane Travert told reporters, adding that non-food products would not be affected.

Banning “buy one, get one free” bargains, which are less common in France than in countries such as Britain, will also help fight against food waste, he said.

The proposed legislation will effectively prohibit “buy one, get one free” offers by barring supermarkets from making discounts of more than 34 percent, while “buy two, get one free” discounts would still be allowed.

Selling at a loss is forbidden in France. The new measures, which also include a 10 percent increase in the regulated threshold at which retailers are allowed to sell a product, will be trialed for two years.

The Moody's warning came as French grocer Groupe Casino announced February 15 that it signed agreements to sell stores and a franchise for EU42 million, as part of a strategy to divest loss-making stores (hypermarket, supermarket and Leader Price). Casino will sell 17 stores to Lidl and one Geant hypermarket to a Leclerc member store, representing a turnover of EUR88 million and two Géant hypermarkets to Groupement Les Mousquetaires, for a total value of EUR23.4 million.

The Moody's report said gross sales of fast-paced consumer goods in France rose by only 1.5 percent in 2018, under the rate of inflation of 1.8 percent.

“We believe that operating conditions will become increasingly difficult in the coming years as structural challenges pile up,” Moody’s said.

Among long-term challenges Moody’s said grocers face is the continued fall in gross sales at hypermarkets, that will reduce grocers’ profitability because a large portion of hypermarkets’ costs, such as rent and salaries are fixed.

Moody's identified a big a part of the revenues from French grocery store giants Carrefour and Casino nonetheless comes from hypermarkets: 52 percent and 25 percent, respectively.

And rising online gross sales are credit negative for the grocers as they’re much less worthwhile than in-store gross sales owing to excessive supply and logistics prices.