Major Supermarket Drops Pepsi and Lay's for Too High Price Tags

In a move against what it considers “unacceptable” price increases, European supermarket chain Carrefour announced it would remove PepsiCo products off its shelves.

No More PepsiCo

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Carrefour, operating one of the world’s largest grocery chains and based in France, informed its customers Jan 4 of its decision to withdraw Lay’s, Doritos, Lipton teas, and other PepsiCo products in response to price hikes.

This move will impact stores in France, Italy, Belgium, and Spain.

Price Battle

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With over 12,000 stores worldwide, notices in certain store aisles declared the company’s commitment to keeping prices low. A representative from PepsiCo said that they have been actively engaged in discussions with Carrefour for several months in an effort to ensure the availability of their products.

Meanwhile, PepsiCo did not reply to a request for comment from FOX Business.

Carrefour Takes a Stand

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Carrefour’s decision is set against the backdrop of soaring food prices in Europe. Specifically, in France, there was a more than 7 percent increase in food prices compared to the previous year in December. March 2023 witnessed the peak of these increases, with prices nearly surging by 16 percent.

Shoppers Applaud Decision

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The decision was met with widespread approval among supermarket customers.”It doesn’t surprise me at all,” shopper Edith Carpentier expressed to Reuters.

“I think there will be lots of products left on the shelves because they have become too expensive, and they are all things we can avoid buying.”

Warning Labels

Earlier, Carrefour had raised concerns about the rising prices of food items and, in a move to urge manufacturers to lower their costs, introduced warning labels in September. These labels read, “This product has seen its volume or weight fall and the effective price by the supplier rise.”

Early Price Talks

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In a bid to combat inflation, the French government requested that retailers and suppliers complete their annual price negotiations by January, a full two months earlier than the norm.

Inflation Impact

France’s approach to regulating its retail sector is unique in Europe, mandating that supermarkets negotiate prices with food and drink producers only once a year to support the nation’s farming industry.

However, the previous negotiation round, conducted at the height of the inflation crisis early last year, resulted in substantial price increases across the board, adversely affecting supermarkets’ turnover. This drove supermarkets to push for price reductions in the most recent negotiations.

Supermarkets are “very, very ready”

James Walton, the chief economist at the Institute of Grocery Distribution, remarked, “The French supermarkets, we know, are very, very ready to de-list people if they don’t like the deals they get. Obviously, that’s a last resort because nobody wins if the goods that people want are not available on the shelves.”

Penalty Box Tactic in U.S. Retail

U.S. retailers are facing similar struggles with suppliers in their efforts to bring down food prices. As a strategy to exert influence, some stores resort to placing brands in what Randall Sargent, a partner in the retail and consumer goods division at Oliver Wyman, calls the “penalty box.”

Is the Approach Effective for Retailers?

This approach involves less favorable shelf placement, reduced promotional efforts, and even elevated prices for the penalized brands, making these products less appealing to consumers compared to other brands, according to Sargent.

CEO Joins the Call for Price Moderation

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Michel-Edouard Leclerc, CEO of the competing supermarket chain E. Leclerc, also expressed his dissatisfaction with supplier price increases in a LinkedIn post. He emphasized the need to persuade major suppliers who excessively raised their prices to now reduce or moderate them.

According to an English translation of his post, Leclerc stated, “We must therefore convince in the coming month all these major suppliers who made the mistake of increasing their prices too much, to lower them now, or to moderate them. We must return to more reasonable, more transparent, and better spread out impacts of their costs.”