Quiver Quantitative - Carrefour (EPA:CARR), a major player in the European retail sector, has taken a bold stand against PepsiCo (NASDAQ:PEP) over rising product prices. In an unprecedented move, the retailer has announced the discontinuation of PepsiCo (PEP) products like Pepsi, Lay's crisps, and 7Up in its stores across France, Italy, Spain, and Belgium. This decision, prompted by what Carrefour terms as "unacceptable price increases" by PepsiCo, reflects the growing tension between retailers and global food giants amid inflationary pressures. In some Carrefour locations, such as a store in the Paris suburb of Auteuil, PepsiCo products were already missing from shelves, accompanied by signs explaining the reason for their absence. This step by Carrefour is a significant move in the ongoing negotiations over product pricing in the retail sector.
Customers, particularly in upscale areas like Paris' 16th district, have generally responded positively to Carrefour's decision. Shoppers like Edith Carpentier believe that the high prices of these products will lead to them being left on shelves, as many are non-essential items. This customer sentiment aligns with Carrefour's stance against price hikes. Meanwhile, PepsiCo, which announced "modest" price increases this year due to sustained demand, has not commented on Carrefour's actions. The company's strategy of hiking prices, despite growing demand, has led to its third consecutive increase in its profit forecast for 2023.
Market Overview:
Carrefour, the French retail giant, takes a stand against rising food costs by delisting PepsiCo products across four European countries. Consumers cheer the move, highlighting growing frustration with inflation-driven price hikes. This escalation in the pricing tug-of-war between retailers and manufacturers adds another layer of uncertainty to the European market. Key Points:
Carrefour shelves Pepsi, Lay's, and 7up in France, Italy, Spain, and Belgium due to "unacceptable" price increases. The French government's early price negotiation push fuels Carrefour's proactive stance against hefty cost rises. Consumers in Paris express support for the delisting, echoing concerns about affordability. PepsiCo remains silent on the delisting, while experts warn of potential industry-wide repercussions. Carrefour's past "shrinkflation" campaign further underscores its commitment to consumer price protection. Looking Ahead:
The success of Carrefour's bold move hinges on consumer appetite for alternative brands and potential concessions from PepsiCo. Other European retailers may follow suit, leading to potentially widespread product delistings and price renegotiations. The French government's role in price regulation might influence Carrefour's leverage in future negotiations. The battle between affordability and manufacturer profitability threatens to disrupt the food and beverage landscape in Europe.
The conflict between Carrefour and PepsiCo is part of a larger pattern observed in the retail industry. Retailers in various countries, including Germany and Belgium, have halted orders from consumer goods firms in response to price increases, indicating a more contentious atmosphere in price negotiations amidst inflation. Carrefour has been particularly proactive in challenging large consumer products and food companies on pricing issues. Last year, the retailer launched a "shrinkflation" campaign, highlighting products that have reduced in size but increased in cost, signaling its commitment to combating inflationary trends.
The situation is especially pronounced in France, where the retail sector is heavily regulated. French supermarkets are required to negotiate prices with food and drink producers only once a year, a system designed to protect the local farm industry. However, the last negotiation round, conducted at the height of the inflation crisis, resulted in substantial price increases across the board. This has impacted the turnover of supermarkets and fueled their eagerness to negotiate for price reductions in the current round of negotiations. James Walton, chief economist at the Institute of Grocery Distribution, noted that French supermarkets are prepared to delist products if they are not satisfied with the deals, indicating the seriousness of the situation.
This article was originally published on Quiver Quantitative