Carrefour is delisting Pepsico products over price hikes
French Carrefour have grown tired of what they believe to be unjustified price overcharging from PepsiCo and have stopped selling several products in a number of countries.
Tough negotiations between chain and supplier are part of the order of the day. There are many indications that they are harder in this industry than in many others.
Naturally, it has to do with the fact that grocery retail is a low-margin industry. If you can pick up a few percentage points here and there on purchases, it quickly reflects on your profits.
We see it in Norway, where the three chains are disagreeing on whether a new regulation on price discrimination of input prices should be imposed.
The discussion has been going on for long and worries about too large price differences in discounts from the producers has made the Norwegian Competition Authorities undertake several analysis and price comparisons of input prices across the chains.
The Ministry has just recently sent its second version of a potential regulation of the matter to be commented upon by the market participants. Hence, the debate on negotiations between retailers and suppliers is also high on the Norwegian agenda.
Overcharging
The latest on the international scene is that one of the world's largest grocery retailers – French Carrefour have grown tired of what they believe to be unjustified price overcharging from PepsiCo.
Hence Carrefour has stopped selling PepsiCo products in its stores in France, Belgium, Spain and Italy for product like Lay’s potato chips, Quaker Oats, Lipton tea among others.
As far as we know Pepsi-Cola is still listed. It is easy to understand why. Nobody or few wants to give Pepsi a monopoly for cola soda.
Shrinkflation
Carrefour's move to pull PepsiCo products from its shelves comes after the supermarket chain used "shrinkflation" stickers to label some products this fall, products the store believes have gotten smaller while their cost has stayed the same or risen. PepsiCo, Nestle and Unilever, were given this label. A representative of Carrefour told the BBC this fall that the move was to "tell manufacturers to rethink their pricing policy."
Other big French supermarket chains said they might follow suit.
“It’s not over,” Michel-Édouard Leclerc, the president of Leclerc, a major food retailer, said in an interview in France last week. He added that many food manufacturers were still asking for price increases of 6 to 8 percent.
A spokesperson for PepsiCo said the company had “been in discussion with Carrefour for many months, and we will continue to engage in good faith in order to try to ensure that our products are available.”
An issue even for the President
President Emmanuel Macron has said he wants to see food prices come down by at least 5 percent, to reflect an overall decline in raw material costs that has started to appear after more than a year of record-high prices resulting in large part from Russia’s invasion of Ukraine.
In November, he demanded that a deadline for once-a-year price negotiations between French retailers and manufacturers be moved up two months, to the end of January, to bring quicker relief for shoppers. France also recently submitted a proposal to the European Union that would force food retailers to conduct a shrinkflation labelling campaign.
Carrefour has started marking its shelves with signs detailing the degree of shrinkage and how much consumers were getting gouged on prices.
“We have large companies that are jacking up the prices of some of their brands, and we want to get them around the table again and achieve price decreases as quickly as possible,” Mr. Macron said.
“It is intolerable to see so many households having to make choices about essential goods.”
Carrefour, which has more 1200 stores in 33 countries, say more delisting can come.
Sources: Reuters, Namnews, FT, WSJ, Carrefour.