Carrefour ditches PepsiCo products in France for high prices

Economic headlines in Europe have been flashing lately: inflation, according to official figures, is finally coming down. But tell that to consumers who still look forward to runaway prices when they go to the supermarket.

On Thursday, France's biggest food retailer took a drastic step to address the situation, announcing it would no longer sell PepsiCo products because the prices were “unacceptably” high for consumers, as French retailers escalated the conflict. When inflation falls, it lowers prices.

Global retail giant Carrefour put up posters Thursday across 3,440 supermarkets in France, where Lay's potato chips, Pepsi and 7-Up soft drinks are commonly displayed, as well as Doritos, Quaker cereal and other PepsiCo products. “We will no longer be selling this brand due to unacceptable price increases,” the signs said.

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

The move was the latest broadside – encouraged by the French government – to try to strong-arm manufacturers to cut food costs from buffets to keep families busy despite a broad slowdown in price increases across Europe.

Part of that campaign includes identifying brands that engage in the practice of shrink inflation, in which manufacturers shrink food packages while maintaining or raising prices.

Inflation in the eurozone fell faster than expected to a new two-year low in November, driven by interest rate hikes by the European Central Bank and efforts by European countries to ease energy and food prices. In France, inflation is high At an annualized rate of 3.7 percent in December, it was down a third from a year earlier.

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

Some producers have justified those costs by arguing that profit margins in Europe are lower than average because the costs of inputs are particularly high. Unilever's chief financial officer, Graeme Pitkethley, told analysts in October that “although historically high, the level of price increases has not been sufficient to offset the price inflation we have experienced.”

France, Europe's biggest grocery market by supermarket sales, has been pressuring manufacturers and retailers to cut prices for more than a year.

President Emmanuel Macron has said he wants to see food prices fall by at least 5 percent, reflecting an overall decline in commodity prices that has begun to emerge after more than a year of record-high prices, largely as a result of Russia's invasion. of Ukraine.

In November, he demanded that the deadline for annual price negotiations between French retailers and manufacturers be extended by two months, to the end of January, to bring swift relief to shoppers. France recently submitted a proposal to the EU that would force food retailers to carry out a shrink labeling campaign. Carrefour has begun marking its shelves with signs detailing the extent of shrinkage and how much consumers are raising prices.

“We have big companies that are raising prices on some of their brands, and we want to get them back around the table and get those prices down as quickly as possible,” Mr. Macron said. “It's unbearable to see so many families making choices about essential items.”

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Many global consumer goods companies have raised prices by double-digit percentages in the past year. They are often responsible for increasing the high costs of materials and labor. At the same time, many of those companies have reported expanding profits by selling fewer products at higher prices.

In recent months, companies have reported an increase in shoppers Weighed down by inflation and high interest rates. Consumer goods companies, including PepsiCo, have said they've noticed customers tightening their wallets.

“I think we're seeing that consumers are more selective now,” Hugh Johnston, PepsiCo's chief financial officer, told analysts on an October earnings call. “You see some orientation toward value.”

Retailers are keen to keep prices down. Executives at Walmart, America's largest retailer, welcomed moderate prices on general merchandise during the holiday season, but were concerned about persistently high food prices.

“The pockets of inflation we're seeing are helping, but we'd like to see more, faster, especially in the dry grocery and consumer goods categories,” Walmart Chief Executive Doug McMillan told analysts in November.

The move in France comes amid a broader drive in Europe to tackle a cost-of-living crisis that persists despite a flagging economy. While the U.S. economy is expanding, Europe is moving down a very different path: an economic recession imposed by high interest rates and the lingering impact of an energy crisis triggered by Russia's war in Ukraine.

In Italy, the government tried to pressure retailers and manufacturers to lower food prices. The Greek government has begun requiring supermarkets to report the prices they charge for basic foods.

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Other major French supermarket chains have said they may follow suit. “It's not over,” Michel-Édouard Leclerc, chairman of Leclerc, a major food retailer, said in an interview with French radio on Tuesday. He said many food manufacturers are still asking for a price hike of 6 to 8 percent.

J. Edward Moreno Contributed reporting from New York.

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