Carrefour (CRRFY.US) said last week it would no longer sell PepsiCo (PEP.US) products in four European countries due to excessive price increases, but industry experts said the negotiating tactic may have little impact given the size of some global brands. Retailers have used the tactic of removing products from shelves for years in price battles with suppliers, but the cost-of-living crisis has sparked more disputes, such as last year's dispute between German retailer Edeka and Procter & Gamble Co.
Supermarkets with razor-thin margins say they are trying to bring their prices in line with rivals while preventing consumers from facing steep price hikes on popular brands. Meanwhile, major food and consumer brands have raised prices over the past few years to cover higher costs and sometimes boost their profit margins.
Carrefour's move comes just over a week before French grocers set prices for the full year. The brinksmanship has reignited a debate over whether grocers can really afford to ditch popular products without losing ground to rivals.
Bernstein analyst Bruno Monteyne said, "In the short term, this will have a slight impact on profitability for both retailers and brands, but ultimately it is mostly noise."
"Retailers believe this improves their image and brand in the minds of consumers, but I doubt there is evidence to support this claim."
In the past, retailers have dropped some brands, only to reintroduce them weeks or months later and accept price increases.
P&G told the media in November that German consumers could still find its brand on Edeka shelves.
In March last year, British supermarket group Tesco raised prices on 11 Colgate products by an average of 28% to avoid a repeat of its price dispute with the toothpaste maker in 2022, industry magazine The Grocer reported. In the same year, Tesco also had a similar dispute with Kraft Heinz.
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"The only retailer that might make sense is the dispute with Walmart, which as the largest grocer in the U.S. would impact sales. For PepsiCo, not selling Carrefour in France is unlikely to impact group profits, while for PepsiCo, not selling Carrefour in France is unlikely to impact group profits
Campbell Soup warned in 2017 that it was having difficulty striking promotional deals with Walmart, and sales of its canned soups fell 9% in the quarter ended in October 2017.
Data from research firm IBISWorld shows France is a crucial market for some consumer goods companies. France has already surpassed Germany, Italy, Spain and other countries to become the EU's largest grocery market in terms of supermarket revenue.
France will account for just over 8% of Swiss chocolate company Lindt's 2022 sales, according to its annual report; France will account for 7% of Schwarzkopf hair products maker Henkel's 2022 revenue, according to Nielsen data analyzed by Barclays.
But in other cases, France's revenue was small.
Nielsen data shows that by 2022, France will account for only 1% of PepsiCo's sales, about 4% of Nestlé's sales, and about 4% of Unilever's sales.
Carrefour said on Thursday it had told customers in four European countries that it would no longer sell products such as Pepsi-Cola, Lay's potato chips and 7-Up because they were too expensive.
In recent years, consumer goods companies such as Nestlé and Unilever have enjoyed profit margins in the 16% to 18% range, while many grocers have had profit margins in the single digits.
Last year, the French government joined several retailers, including Carrefour, in asking companies including Nestlé, Lindt Henkel and Unilever to significantly raise prices ahead of contract negotiations.
The chairman of E. Leclerc, France's largest supermarket chain, also called on all major consumer goods companies to lower prices on Friday.