Major French retailer drops PepsiCo products due to high prices

Economic headlines in Europe have been glowing lately: inflation is finally falling, according to official statistics. But tell that to consumers who still have to deal with runaway prices when they go to the supermarket.

On Thursday, France’s largest food distributor took a dramatic step to address the situation, announcing it would no longer sell PepsiCo products because prices were “unacceptably” high for consumers. do not reduce prices as inflation decreases.

Carrefour, a global retail giant, put up posters Thursday in its 3,440 supermarkets in France, which typically display Lay’s chips, Pepsi and 7-Up soft drinks, Doritos, Quaker cereal and other PepsiCo products. “We no longer sell this brand due to an unacceptable price increase,” the signs said. PepsiCo did not immediately respond to a request for comment.

The move was the latest move – encouraged by the French government – to try to give manufacturers strong weapons to reduce food costs, which continue to burden families despite a broad slowdown in price increases across Europe.

Part of that campaign includes identifying brands that are also engaging in the practice of shrinkage, in which manufacturers reduce the size of food packages but maintain or increase the price.

Eurozone inflation fell to a new two-year low in November, falling much faster than expected due to an aggressive campaign of interest rate hikes by the European Central Bank and efforts by European countries to cut energy and food prices. Inflation in France rose with an annual rate of 3.7 percent in December, a third less than a year earlier.

But food price inflation is particularly persistent. A typical basket of basic foods in France, from pasta to yoghurt, is still 7 percent higher than a year ago.

Some manufacturers have justified these costs by saying that profit margins in Europe are below average because the costs of raw materials 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 the largest grocery market in Europe in terms of supermarket sales, has also been putting pressure on manufacturers and retailers to cut prices for more than a year.

President Emmanuel Macron has said he wants food prices to fall by at least 5 percent, reflecting the general decline in commodity costs that is starting to materialize after more than a year of record high prices, fueled in large part by the Russian invasion. of Ukraine.

Late last year, he demanded that the deadline for once-a-year price negotiations between French retailers and manufacturers be pushed back by two months, to the end of January, to provide faster relief to shoppers. France also recently submitted a proposal to the European Union that would force food retailers to implement a shrink-labeling campaign. Carrefour has started marking its shelves with signs indicating the extent of shrinkage and how much price pressure is being squeezed by consumers.

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

Many global consumer goods manufacturers have increased their prices by double digits in the past year. They have often attributed the increases to higher costs of ingredients and labor. At the same time, many of these companies report that they are increasing their profits because they are selling fewer items at higher prices.

In recent months, companies have reported an increase in customers pressured by inflation and high interest rates. Consumer goods companies, including PepsiCo, have reported that customers are in control.

“I think we’re seeing consumers being more selective right now,” PepsiCo Chief Financial Officer Hugh Johnston told analysts in an October earnings call. “You see some orientation towards value.”

The action in France comes amid a broader push in Europe to tackle a cost-of-living crisis that persists even as the economy stagnates. While the US economy grew, Europe followed 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 fueled by Russia’s war in Ukraine.

In Italy, the government has tried to pressure retailers and producers to reduce food prices. The Greek government has started requiring supermarkets to report prices for basic food products.

Other major French supermarket chains said they could follow suit. “It’s not over yet,” Michel-Edouard Leclerc, the president of Leclerc, one of France’s largest food retailers, said in an interview on French radio on Tuesday. He said many food manufacturers are still asking for price increases of 6 to 8 percent.

J. Edward Moreno contributed reporting from New York.