(Source – CNBC TV18)
Carrefour, one of France’s major supermarket chains, is set to cease the sale of PepsiCo products due to their increasing costs, marking the latest clash between retailers and suppliers over pricing. The decision will not only affect Carrefour’s stores in France, where notes will be displayed alongside products like Pepsi, 7up, and Lay’s chips, explaining the discontinuation, but it will also extend to Italy, Spain, and Belgium, according to reports from CNN affiliate BFM-TV.
The move signifies a heightened effort by Carrefour to exert pressure on some of the world’s largest consumer goods companies to reduce prices, responding to the companies’ consistent price hikes over the past two years, driven by rising energy, commodity, and labor costs. In September, Reuters reported that Carrefour had initiated a “shrinkflation” campaign, warning consumers about reduced product sizes despite sustained or increased prices, even as raw material costs eased.
Major Companies have increased their prices
Carrefour’s CEO, Alexandre Bompard, has vocalized frustration over the lack of cooperation from consumer goods companies in efforts to lower prices for thousands of staples, despite a decline in raw material costs, according to Reuters. On the other hand, PepsiCo’s CEO, Ramon L. Laguarta, anticipated “higher inflation” during an earnings call in October, indicating that prices would remain elevated throughout the year.
Preliminary data released on Thursday revealed a rise in inflation in France to 4.1% in December, up from 3.9% in November. Food inflation, however, saw a slight decrease from 7.7% to 7.1%, as reported by the country’s statistics agency. Notably, other major companies such as Nestlé, Unilever, Coca-Cola, and Procter & Gamble have also increased prices over the past two years, passing on rising costs to consumers. This trend has led to tense negotiations between retailers and consumer goods giants, resulting in some products being temporarily removed from shelves.
Prompted consumers to turn to private-label products
In 2022, Kraft Heinz halted the supply of certain products, including ketchup and baked beans, to the largest UK grocery retailer Tesco during negotiations, with Tesco deeming the price increases “unjustifiable.” After the products were reintroduced, Heinz withdrew the price hikes on its most popular lines. The surge in prices has prompted consumers to turn to private-label products offered by retailers, and Carrefour’s CEO Bompard announced last February that the company aimed to significantly increase the share of its private labels, reaching 40% of total sales over the next three years.
