Carrefour abandons PepsiCo products in France due to their high prices

Carrefour abandons PepsiCo products in France due to their high prices

The economic headlines in Europe have been glowing lately: inflation, according to official statistics, is finally falling. But tell that to the consumers who still face exorbitant prices when they go to the supermarket.

France’s largest food retailer took a drastic step to deal with the situation on Thursday, announcing it would no longer sell PepsiCo products because prices were “unacceptably” high for consumers, intensifying the retailer confrontation French to name and shame brands that are not. tt lower prices as inflation falls.

Global retail giant Carrefour on Thursday put up posters in its 3,440 supermarkets in France where Lay’s chips, Pepsi and 7-Up soft drinks are typically on display, as well as Doritos, Quaker cereals and other PepsiCo products. “We no longer sell this brand due to unacceptable price increases,” the signs read.

A PepsiCo spokesperson said the company had been “in discussions with Carrefour for many months and we will continue to engage in good faith to try to ensure the availability of our products.”

The move is the latest attack – encouraged by the French government – aimed at pushing manufacturers to reduce food costs, which continue to penalize families despite a widespread slowdown in price increases across Europe.

Part of this campaign involves identifying brands that also engage in the practice of shrinkage, in which manufacturers reduce the size of food packages while maintaining or increasing prices.

Eurozone inflation fell to a two-year low in November, rising much faster than expected due to an aggressive campaign of interest rate hikes by the European Central Bank and efforts by countries Europeans to relax energy and food prices. In France, inflation pink at an annual rate of 3.7 percent in December, down a third from the previous year.

But food price inflation is particularly persistent. In France, the typical basket of basic food products, from pasta to yogurt, is still 7% higher than a year ago.

Some manufacturers have justified these costs by arguing that profit margins in Europe are lower than average because input costs are particularly high. Unilever’s chief financial officer, Graeme Pitkethly, told analysts in October that “the scale of price increases, while historically high, has still not been sufficient to cover the cost inflation we have experienced.” .

France, which is Europe’s largest food market in terms of supermarket sales, has been putting pressure on manufacturers and retailers to lower prices for more than a year.

President Emmanuel Macron said he wanted to see food prices fall by at least 5 percent, to reflect an overall drop in raw material costs that has started to emerge after more than a year of record prices resulting largely from the Russian invasion. of Ukraine.

In November, he called for the deadline for annual price negotiations between French retailers and manufacturers to be brought forward by two months, to the end of January, to provide quicker relief to shoppers. France also recently submitted a proposal to the European Union that would require food retailers to carry out a labeling campaign linked to shrinkage. Carrefour has started putting signs on its shelves indicating the level of shrinkage and the number of consumers who are victims of price gouging.

“We have big companies that are raising prices on some of their brands, and we want to bring them back to the table and achieve price cuts as quickly as possible,” Macron said. “It is intolerable to see so many households having to make choices regarding essential goods. »

Many global consumer goods companies have raised prices by double digits over the past year. They often attributed these increases to higher ingredient and labor costs. At the same time, many of these companies reported increasing profits by selling fewer items at higher prices.

In recent months, companies have reported that buyers are more weighed down by inflation and high interest rates. Companies that sell consumer goods, including PepsiCo, said they noticed their customers tightening their purse strings.

“I think what we’re seeing right now is that the consumer is more selective,” Hugh Johnston, PepsiCo’s chief financial officer at the time, told analysts on an earnings conference call in October. “You see some value orientation.”

Retailers are eager to see prices drop. Executives at Walmart, the largest U.S. retailer, welcomed moderation in general merchandise prices heading into the holiday season, but expressed concern about continued high food prices.

“The pockets of disinflation we’re seeing are helping, but we’d like to see more, faster, particularly in the dry food and consumables categories,” Walmart Chief Executive Doug McMillon told analysts in November.

France’s decision comes amid a broader push in Europe to combat a cost-of-living crisis that persists even as the economy falters. While the U.S. economy is expanding, Europe is on a very different path: a prolonged economic slowdown, burdened by a double dose of high interest rates and the lingering impact of the energy crisis triggered by Russia’s war in Ukraine.

In Italy, the government has sought to pressure retailers and manufacturers to reduce food prices. The Greek government has started requiring supermarkets to report prices for basic foods.

Other major French supermarket chains have said they could follow suit. “It’s not over,” Michel-Édouard Leclerc, president of Leclerc, a major food retailer, said Tuesday in a French radio interview. He added that many food manufacturers were still asking for price increases of 6 to 8 percent.

J. Edward Moreno contributed reporting from New York.

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David B.Otero

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