French retailer Carrefour has stopped selling PepsiCo products in its stores across Spain, France, Belgium and Italy due to disputes over price increases imposed by the food and beverage giant. The move represents a major escalation of tensions between retailers and suppliers over inflation and could set off similar actions by other chains.
Carrefour Expands Ban Beyond France
After dropping PepsiCo goods from shelves in France earlier this week, Carrefour has now removed all PepsiCo beverages and snacks from its locations in Spain, Belgium and Italy as well.
The suspension applies to popular brands like Pepsi, 7Up, Lay’s potato chips, Doritos and more. Over 1,000 Carrefour supermarkets are impacted across Europe.
Carrefour cited “unjustified price rises” demanded by PepsiCo in light of high inflation as the reason for dropping its products. The retailer accused the supplier of profiting off consumers struggling with the cost-of-living crisis.
Price Hikes Up to 10%
According to sources, PepsiCo sought price increases ranging from 5% to 10% despite already raising prices 8% over the past year.
Carrefour deemed these incremental hikes unacceptable as it tries to minimize cost impacts on shoppers. Prices for food and household basics rose about 13% across the Eurozone last year.
“It’s our duty to defend the purchasing power of our customers,” a Carrefour spokesperson said.
The price war brewing between the two consumer giants highlights growing tensions across the entire food supply chain.
Pepsi Says Move Was “Sudden and Surprising”
In a statement, PepsiCo said Carrefour’s move was “sudden and surprising” after months of negotiations that “advanced positively.”
The company justified higher prices based on its own inflating costs, including ingredients, packaging, transport and energy. But it said the hikes requested were below its internal cost increases.
“Pricing discussions involve give and take between both parties and we believe our proposals to Carrefour sought to reflect those increasing costs in a reasonable and balanced way,” a PepsiCo spokesperson stated.
Shelves Cleared of Pepsi Products
Images circulated on social media showed gaps on shelves usually stocked with PepsiCo drinks and snacks.
The absence of popular Lay’s crisps varieties in particular caused disappointment. Carrefour placed signs in soda aisles indicating it stopped selling the brands “because of unjustified price increases asked by PepsiCo.”
Customers Generally Supportive
Many customers voiced support for Carrefour taking a stand against excessive supplier price hikes. But others lamented the loss of their favorite drink and chip brands.
Carrefour workers began removing PepsiCo products from shelves on Thursday. Alternative beverage brands have already been moved into freed up spaces in drinks sections.
Both Sides Say Negotiations Ongoing
Despite the very public row, Carrefour and PepsiCo said they remain in negotiations over pricing and hope to resolve the dispute quickly.
PepsiCo said it wants to “work constructively” with the retailer to restore availability of its brands. Carrefour also said talks continue but that differences in positions remain.
Could Spark Wider Backlash
Retail experts predict Carrefour’s targeting of such a well-known producer like PepsiCo over prices could encourage copycat moves by other supermarket operators.
French rival Leclerc said it will review agreements with food manufacturers and apply pressure on suppliers it deems responsible for excessive inflation.
The British Retail Consortium representing UK supermarkets advocated for “transparent, equitable and good faith commercial relationships” in the supply chain.
##PepsiCo Faces Reputational Risk
While financial impacts may be limited in the short term, analysts say #PepsiCo faces significant reputational damage if the Carrefour dispute drags on.
“Coming across as trying to squeeze consumers with unjustified prices can hurt brand image,” said retail analyst Priya Kothari. “It may provide an opportunity for beverage rivals like Coca Cola to seize market share.”
Social Media Backlash Builds
Sentiment toward PepsiCo has already soured on social platforms following the Carrefour announcement. Many posts accuse the company of “corporate greed” and taking advantage of shoppers’ woes.
“Raising prices in a crisis just to keep profits up is shameful. Boycott all Pepsi products!” one viral tweet stated.
However, some analysts believe consumer loyalty to brands like Pepsi itself remains resilient despite reputational hits to the parent company. Switching soda preferences represents more significant change of habits compared to swapping between potato chip varieties.
What Led to the Breaking Point?
Tensions between PepsiCo and retailers like Carrefour failed to reach compromises on pricing against a backdrop of the following key factors:
Surging Production Costs
- Raw material and packaging prices climbed over 15%
- Transportation, labor and energy costs all rose significantly
Falling Consumer Demand
- Purchase volumes dropped as shoppers reduced non-essential spending
- Supermarkets faced pressure to limit price hikes amid cost-of-living crisis
Reduced Negotiation Power
- Grocers consolidation increased dominance over food suppliers
- But shoppers have more retailer options than specific brands
- Suppliers reduced depth and breadth of promotions/allowances
- Retailers cut orders as inventory levels exceeded demand
What’s Next in the Price War?
All eyes are on whether the pricing standoff between Carrefour and PepsiCo sets off a domino effect across Europe’s retail landscape.
Consumer goods giants from Nestle to Reckitt could face supply suspensions or renewed negotiations with grocery chains over cost inflation.
More retailers may also follow Carrefour’s lead and take a tougher line against price increases deemed unjustified despite their own margin pressures.
Ongoing implications could include:
- Global suppliers losing bargaining power vs consolidated retailers
- Shoppers switching brands based on price sensitivity
- Smaller manufacturers gaining shelf space from majors
- Demand shifts better matching constrained supply
The scale of PepsiCo’s vast product portfolio in Carrefour stores means both sides have incentive to find compromise. But their very public pricing dispute represents a critical juncture for the entire sector amid economic uncertainty.
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