Major Retailer Drops Pepsi, Lays Products To Protest "Unacceptable Price Increases"

Shrinkflation - the reduction in quality or quantity while increasing retail prices - is being challenged as inflation is reduced but packaged goods companies refuse to give up the excess profits. 

The growing resistance signals an end to many companies excess pandemic era profits - and a significant socio-economic signal. JL  

Mauro Orru and Jennifer Maloney report in the Wall Street Journal:

One of the world’s biggest supermarket chains said it would drop PepsiCodecrease; red down pointiproducts to protest unacceptable price increases, after two years of rising prices. Carrefour, decrease;which operates thousands of stores across more than 30 countries, said it would stop selling Pepsi, Doritos and other products in four countries. Supermarket operators  have signaled concerns about rising prices as the overall rate of inflation has slowed.Carrefour’s decision on PepsiCo comes months after the retailer began attaching labels to products it claims are (representative of) shrinkflation, when the quantity of a product diminishes in its packaging but the retail price is unchanged.

One of the world’s biggest supermarket chains said it would drop several 

PepsiCo PEP -0.32%decrease; red down pointing triangle

 products to protest what it called unacceptable price increases, a rare public standoff between a grocer and food maker after more than two years of rising prices.

Carrefour CA -0.89%decrease; red down pointing triangle

, which operates thousands of stores across more than 30 countries, said it would stop selling Pepsi, Doritos and other products in France, Italy, Spain and Belgium. A spokesman for the French company said Thursday that it had decided to add notes to store shelves to explain the changes to customers. 

Notes seen by The Wall Street Journal say the company is no longer selling items such as Lay’s, Doritos and Cheetos chips, Benenuts snacks, Alvalle gazpacho, Lipton teas, Pepsi and 7 Up soft drinks and Quaker foods. 7 Up is sold outside the U.S. by PepsiCo.

“We’ve been in discussion with Carrefour for many months and we will continue to engage in good faith in order to try to ensure that our products are available,” a PepsiCo spokeswoman said. She declined to comment further.

 

In October, PepsiCo finance chief Hugh Johnston told The Wall Street Journal that product price increases would slow in 2024 and would be roughly in line with the overall rate of inflation. The slowdown follows two years of sharp price increases by PepsiCo on its soft drinks, snacks and packaged foods. 

The company, which is slated to report its latest quarterly results next month, has forecast earnings growth of 13% and revenue growth of 10% for 2023, excluding currency impacts.  

Through the Covid-19 pandemic, a number of companies boasted about their ability to raise prices without significantly damaging sales as a sign of brand strength. Johnston has said that PepsiCo products appeal to a range of shoppers and that people tend to indulge in items such as chips and soda as affordable luxuries even during hard economic times.

 

Supermarket operators in the U.S. have also signaled concerns about rising prices in some aisles of stores, even as the overall rate of inflation has slowed. 

Walmart

 Chief Executive Doug McMillon said in November that “we may be managing through a period of deflation in the months to come, and while that would put more unit pressure on us, we welcome it, because it’s better for our customers.”

Europe represented about 14%—or roughly $9 billion—of PepsiCo’s global revenue in the first nine months of 2023. Bernstein analyst Callum Elliott estimates that Carrefour stores in France, Italy, Spain and Belgium represent 0.25% of PepsiCo’s global revenue.

In France, food-price inflation surged into double digits in 2022 and reached nearly 16% in March 2023. In December, food prices rose 7.1% over the past 12 months. The French government has also criticized major manufacturers and said it would push them to bring down prices.

Carrefour’s decision on PepsiCo products comes roughly four months after the retailer began attaching labels to products it claims are subject to so-called shrinkflation—when the quantity of a product diminishes in its packaging but the retail price is unchanged. Reuters and local media earlier reported on Carrefour’s decision.