Major Supermarket Chain Drops Lay’s and Pepsi Over Rising Costs
Carrefour, a leading European supermarket chain, has decided to discontinue stocking PepsiCo products due to what it deems excessive price increases. This decision will affect several countries including France, Italy, Belgium, and Spain.
Announcement to Customers
In January, Carrefour notified its customers that it would no longer be selling popular PepsiCo items such as Lay’s, Doritos, and Lipton teas in its stores. This move is a direct response to the recent price hikes imposed by PepsiCo.
Global Presence and Price Commitment
Carrefour operates over 12,000 stores worldwide. The company has placed notices in its store aisles affirming its commitment to maintaining low prices for its customers.
PepsiCo’s Response
A PepsiCo representative stated that the company had been in discussions with Carrefour for several months to ensure the continued availability of their products. However, PepsiCo did not provide a comment when contacted by FOX Business regarding the issue.
Impact of Rising Food Prices
The decision by Carrefour comes against a backdrop of soaring food prices in Europe. Notably, France experienced a significant increase in food prices, with a peak in March 2023 where prices surged by nearly 16%.
Positive Reception from Shoppers
Carrefour’s decision has been met with approval from its customers. Many shoppers, like Edith Carpentier, believe that the high prices will lead to many products remaining unsold as they are items that consumers can avoid buying.
Implementation of Warning Labels
In September, Carrefour began using warning labels on products to inform customers about any reductions in quantity or increases in price, highlighting the changes made by suppliers.
Early Price Negotiation Initiative
Due to inflation concerns, the French government requested that annual price negotiations between retailers and suppliers be completed by January, two months earlier than the usual schedule.
Unique Regulatory Approach in France
France’s retail sector is uniquely regulated to support the national farming industry. Supermarkets are required to negotiate prices with food and drink producers once a year, a policy that has led to significant price increases during the last negotiation round.
Supermarket Readiness to Delist
James Walton, chief economist at the Institute of Grocery Distribution, noted that French supermarkets are prepared to delist suppliers if the negotiations do not yield favorable outcomes. This strategy is considered a last resort to ensure that essential goods remain available.
Penalty Box Strategy in the U.S.
In the U.S., some retailers use a “penalty box” strategy to manage supplier relations. This involves giving less favorable shelf placement and promotional support to brands that do not offer competitive prices.
CEO Advocacy for Price Moderation
Michel-Edouard Leclerc, CEO of E. Leclerc, another supermarket chain, has publicly expressed his dissatisfaction with the price increases by suppliers. He emphasized the need for major suppliers to either reduce or moderate their prices to more reasonable levels.
Industry-wide Impact and Strategy
The strategies employed by supermarkets like Carrefour and E. Leclerc underscore a broader industry push towards maintaining affordability and transparency in pricing amidst challenging economic conditions. This approach not only benefits consumers but also encourages fair pricing practices among suppliers.
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