Carrefour, a French multinational supermarket giant, has decided to cease the sale of PepsiCo products in its stores across France, Belgium, Spain, and Italy due to significant price hikes on popular items like Pepsi soda, Lipton Iced Tea, Lay's potato chips and Quaker Oats.
The French grocery chain took immediate action, removing PepsiCo products from shelves in France and placing small signs in stores explaining the decision with a message, "We no longer sell this brand due to unacceptable price increases." The prohibition will extend to Belgium, Spain, and Italy, but Carrefour, with a vast network of 12,225 stores across over 30 countries, has not specified the implementation date for these countries.
This move signifies a new chapter in the ongoing conflicts over prices between retail chains and major international food companies, according to the Associated Press.
Several months before, following failed negotiations regarding the proposed price increase, PepsiCo products had already been delisted with significant grocery retailers in Germany. The products are no longer available at Edeka, which accounted for approximately 50% of PepsiCo’s sales in Germany. Additionally, they are no longer stocked at Aldi and Kaufland (Schwarz Group).
In 2022, after terminating various alliances with competitors, Carrefour announced the establishment of the new procurement unit Eureca, based in Spain and responsible for Carrefour activities in France, Poland, Spain, Italy, Belgium, and Romania. Carrefour followed the example of Aldi and Lidl (Schwarz-Group), which have been sourcing products on a European scale.
Since 2023, Carrefour has also started highlighting hidden price increases on branded products with attached warning labels ("shrinkflation").
This move aligns with a new French law aimed at combating the escalating cost of living, imposing hefty fines on supermarkets failing to reach pricing agreements with suppliers. The French government, led by President Emmanuel Macron, enacted a law in November that accelerated annual negotiations between supermarkets and suppliers on pricing, moving the deadline to January 31. Fines for grocery companies failing to meet this new deadline have been raised to 5 million euros (USD 5.5 million).
PepsiCo attributes its price hikes to increased costs for grain and cooking oil, pointing to the aftermath of Russia's invasion in Ukraine. However, global markets witnessed a considerable decrease in these commodity prices last year from the record highs in 2022.
The U.N. Food and Agriculture Organization reported a 13.7% decrease in its food price index in 2023 compared to the previous year, but certain categories, such as sugar and rice, experienced price growth. Despite this overall relief, families at supermarkets are yet to feel the impact of these reductions.
PepsiCo, also known for brands like Cheetos, Mountain Dew, and Rice-A-Roni, has consistently increased prices by double-digit percentages for seven consecutive quarters. Despite witnessing a rise in profits, these hikes have impacted sales, with consumers opting for more budget-friendly alternatives. PepsiCo has also acknowledged adjusting package sizes to cater to consumer demands for convenience and portion control.
PepsiCo responded to the situation, stating that they have been in ongoing discussions with Carrefour for several months and expressed their commitment to engaging in good faith to ensure the availability of their products.
PepsiCo anticipates that price increases will align more closely with inflation rates, which have decreased globally since the supply chain disruptions during the COVID-19 pandemic and the conflict in Ukraine. However, consumer prices in the 20 European Union countries that use the euro rose to 2.9% in December, rebounding after seven months of declines.
Industry experts, such as Burt Flickinger III, managing director of grocery consultancy Strategic Resource Group, suggest that PepsiCo's aggressive price increases made it a target, and other major brands might face similar actions from retailers. The showdown between Carrefour and PepsiCo is seen as a test of customer loyalty, questioning whether shoppers prioritize the store or the brand.
This conflict resonates globally, as U.S. retailers like Walmart have also expressed dissatisfaction with consumer product companies continuously raising prices, particularly in packaged foods and household goods.
