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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 strong-arm 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 7 Up and Doritos from its stores in France, Italy, Spain, Belgium, and Poland.

It followed a monthslong 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.

In a statement to Fortune, a representative for PepsiCo said, "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."

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 toward central bank targets of 2%, pressure
is increasing on suppliers to lower the prices of their products.

Representatives for E.Leclerc and Carrefour didn’t immediately respond to Fortune’s requests for comment.

https://finance.yahoo.com/news/supermarket-chain-pulled-pepsico-products- 121411326.html

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