Supermarket giants announced the "ban" on Pepsi: stop selling Pepsi and Lay's potato chips, what is the reason?
According to a report by The Paper on January 5, a few days ago, the world's top supermarket giant Carrefour announced that it would stop selling Pepsi, Lay's, Doritos and 7Up products in France, because they believe that the price increase of Pepsi products is unacceptable.
A Carrefour spokesperson said Thursday that the group had decided to post a statement on store shelves in France explaining that it no longer sold eight PepsiCo brands, including Lay's, Doritos, Benenuts, Alvalle, Lipton, Pepsi, 7Up and Quaker.
Carrefour will also reportedly remove PepsiCo products from stores in Italy, Spain and Belgium. According to Carrefour's 2022 annual report, there are more than 9,000 stores in the four affected countries, accounting for about two-thirds of Carrefour's 14,348 stores worldwide.
Carrefour announced the "blocking" of Pepsi in four European countries
According to the Financial Associated Press, on January 4, local time, a spokesman for Carrefour's French supermarket said that Pepsi product shelves in Carrefour stores in France, Italy, Spain and Belgium will post slogans, indicating that supermarkets will no longer stock relevant brand products due to unacceptable price increases.
This means that customers in these four European countries will no longer be able to buy PepsiCo products in Carrefour supermarkets, announcing that the retail giant Carrefour and the global food giant PepsiCo have entered a hot business war, and Carrefour is using its channel advantage to crack down on Pepsi's pricing power.
PepsiCo said in a statement that it has been in talks with Carrefour for months and will continue to work in good faith to secure the supply of its products. However, since Thursday, some Carrefour stores have stopped selling products such as Cheetos and 7-Up, and Pepsi and some products are still on the shelves.
However, consumers in supermarkets not only did not complain, but happily ate melons. Edith Carpentier, a shopper in Paris, said she wasn't surprised at all that the items on the shelves had become too expensive and that she had avoided buying those products.
In October, PepsiCo said demand was firm and kept rising, planned to raise prices slightly, and raised its annual profit outlook for the third time. Prior to that, PepsiCo had raised prices for seven consecutive quarters.
This approach of "chasing inflation with price increases" has clearly put pressure on supermarket turnover and forced retailers to demand price cuts in a new round of price negotiations. In addition to Carrefour, grocery retailers in several countries, such as Germany and Belgium, have also stopped placing additional orders with some consumer goods companies.
Carrefour is clearly one of the most negotiating companies in the retail industry and one of the most willing to challenge the price strategies of consumer goods companies. Last year, it launched a campaign to shrink inflation, plastering warnings on small-sized items from brands such as PepsiCo to alert consumers.
However, from a business point of view, Carrefour's move is also quite risky. James Walton, chief economist at the magazine's Distribution Institute, pointed out that French supermarkets have always wanted to erase the business they don't like from their purchase lists, but the problem is that supermarkets don't benefit if they don't have what customers want on the shelves, and neither do food brands.
According to public information, Carrefour (Carrefour), founded in 1959, is the pioneer of the hypermarket format, the largest retailer in Europe, and the second largest international retail chain group in the world. According to the financial report data, Carrefour Group's sales in the third quarter of 2023 were 23.629 billion euros (about 25.8 billion US dollars), a year-on-year increase of 9%. Among them, sales in France were 10.769 billion euros, and sales in the rest of Europe were 6.541 billion euros.
Inflationary pressures persist in Europe
PepsiCo has raised prices several times
In fact, the above events are a microcosm of inflation. Eurozone inflation fell to a two-year low in November 2023, much faster than expected, thanks to aggressive interest rate hikes by the European Central Bank (ECB) and efforts by European countries to ease energy and food prices. In France, inflation rose at an annual rate of 3.7% in December, down a third from a year earlier.
But rising food prices continue. The typical French basket of basic foods, from pasta to yogurt, is still 7% higher than it was a year ago. French President Emmanuel Macron has said he wants to see food prices fall by at least 5 percent.
Last year, many global consumer goods companies raised prices by double digits. They often attribute the price increases to rising raw material and labor costs. At the same time, many of these companies report expanding profits as a result of selling fewer items at higher prices. In recent months, companies have reported that shoppers are under more pressure from inflation and high interest rates. Consumer goods sales companies, including PepsiCo, reported that they noticed customers tightening their wallets.
According to the financial report data, PepsiCo's performance in the third quarter of 2023 exceeded expectations, of which quarterly revenue was $23.453 billion, a year-on-year increase of 6.75%, slightly exceeding Wall Street's expectations of $23.38 billion, and net profit attributable to the parent company reached $3.092 billion, a year-on-year increase of 14.4%, which drove earnings per share to $2.25, a year-on-year increase of 14.8%, higher than the market expectation of $2.16. Similarly, organic revenue, which is a better indicator of the quality of growth, was 8.8 percent higher than expected year-over-year. However, looking back at PepsiCo's data from previous quarters, it should be pointed out that despite the overall performance in the third quarter, its organic revenue growth has shown an inflection point, and after seven consecutive quarters of double-digit growth, it has fallen back to a single-digit level in the third quarter.
On the surface, the decline in organic revenue growth is related to PepsiCo's repeated price increases since last year. According to the data, on the basis of the previous two rounds of price increases, PepsiCo raised the overall price by 11% again in the third quarter of last year, and at the same time, PepsiCo implemented a reduction strategy for some product lines. Although the strategy of price increase and volume reduction has strongly promoted the growth of overall performance, it has also triggered consumers to re-evaluate the value performance of their products, which in turn affects the level of organic income.
"I do think we're seeing consumers become more discerning right now," Hugh Johnston, then PepsiCo's chief financial officer, told analysts on an earnings call last October. ”
Retailers, on the other hand, are eager to see prices drop. Executives at Walmart, the largest retailer in the United States, welcomed the slowdown in grocery prices ahead of the holiday season, but were concerned about high food prices.
Walmart CEO Doug McMillon told analysts in November, "Some of the deflation we're seeing is helping, but we'd like to see more, faster, especially in the dry grocery and consumer goods categories." ”
France's move comes as Europe is gaining broader momentum to tackle the ongoing cost-of-living crisis despite the economic downturn. In Italy, the government has tried to pressure retailers and manufacturers to lower food prices. The Greek government has begun requiring supermarkets to report the prices charged for basic foodstuffs. Other large French supermarket chains have said they may follow suit.
Edited by Duan Lian Du Bo
Proofreading|Sun Zhicheng
The daily economic news is synthesized from The Paper, the Financial Associated Press, the Securities Times, Jiemian News, Brokerage China, public information, etc
National Business Daily