Europe’s supermarkets are going to war with major suppliers in a battle over “shrinkflation.” But two of the biggest chains appear to be at odds over how they most effectively strongarm companies like Unilever and PepsiCo into dropping prices.
The chairman of E.Leclerc, France’s biggest supermarket chain, has vowed to keep stocking PepsiCo products on the group’s shelves days after appearing to back his main competitor’s plan to scrap the products over rising prices.
Last week, French supermarket group Carrefour said it was removing PepsiCo items including 7up and Doritos from its stores in France, Italy, Spain, Belgium, and Poland.
It followed a months-long tussle with PepsiCo and other brands over acts of shrinkflation, where suppliers reduce the sizes and contents of their items without reducing prices.
Carrefour exposed PepsiCo with labels on its shelves last year noting the product changes ahead of its annual price negotiations. It had also entered negotiations with Unilever and Nestlé after noticing similar shrinkage trends.
E.Leclerc decides against ‘show of strength’
While Carrefour has the benefit of Government backing in what has become a highly politicized issue, it looks like it might be harder to goad the group’s competitors into an all-out war against suppliers.
In a post on Linkedin Friday, E.Leclerc chair Michel-Edouard Leclerc referenced Carrefour’s decision to pull PepsiCo products last week, as well as the group’s ongoing price negotiations with suppliers.
“Like you, we are fed up with inflation,” Leclerc wrote. “You feel like you’ve been cheated. And since we’re in a period of negotiations, we’re putting pressure on our suppliers… And we put pressure on ourselves!”
Speaking on French news channel BFMTV Monday, Leclerc again spoke about the country’s price negotiations, the deadline of which is the end of January. He added that he would be asking supplier Danone for deflation in E.Leclerc stores.
However, Leclerc said his supermarket wouldn’t yet escalate tensions to Carrefour’s level, preferring to convince the group to lower prices so it can increase revenues.
“I continue to sell Pepsi,” Leclerc said.
“We can tell suppliers: see with lower prices you can build up revenue and I think this argument will prevail over a show of strength.”
Leclerc’s sentiment suggests some fractures in how different retailers are challenging suppliers to lower prices, with E.Leclerc backing a more passive approach. It may also help pull customers from Carrefour over to one of its biggest rivals.
Constant price rises
The pricing strategies of major suppliers have come under the spotlight in recent months, following years of price rises blamed on supply chain shocks in the wake of the COVID-19 pandemic and Russia’s invasion of Ukraine.
Despite that rationale, recent research instead suggests that profiteering was a major driver of price rises.
A December study of 1,300 corporations by the IPPR and Common Wealth showed profits rose much faster than costs in 2022. Companies in a position to take the most advantage of supply shocks, like oil and gas giant Shell and food supplier Kraft Heinz, enjoyed the biggest jumps in profit.
Now, as inflation falls back towards Central Bank targets of 2%, pressure is increasing on suppliers to lower the prices of their products.
Representatives for PepsiCo, E.Leclerc and Carrefour didn’t immediately respond to Fortune’s requests for comment.
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