Pepsi Co., the global soft drink and snack giant, recently received a resounding “no thanks” from French supermarket chain, Carrefour, after the soft drink maker tried to increase prices yet again. Since the end of the pandemic, Pepsi Co., like so many other companies, has been raising prices on its products adding to inflationary pressure in the global economy. Now though, the French supermarket chain is saying enough is enough, and is refusing to stock Pepsi’s products at their new higher prices. Instead, Carrefour put up a sign essentially indicating that it had taken a stand against what it believes to be unnecessary price gouging by the cola and snack maker. Carrefour’s stand against Pepsi comes as France continues to face economic challenges. Compared to the United States, where inflation has peaked and a so-called soft-landing seems likely, France, like much of the rest of Europe continues to work to get its economy back on track. Food inflation has been particularly problematic. Indeed, compared to last year, prices on food in France rose more than 7 percent in December.
In addition to its French stores, Carrefour has also taken Pepsi drinks and snacks off the shelves in Belgium, Italy, and Spain. What about shoppers hoping to get a fix for their cola and chip habit? Perhaps not surprisingly, shoppers are applauding the move by Carrefour, pointing out that high prices on essentials make it easier to skip products like Pepsi and Doritos. Just how Pepsi views the move by Carrefour is unclear. So far, the cola maker has only indicated that it will continue to work with the supermarket chain in good faith, although last year Pepsi indicated that rising production costs would likely result in further price increases. For some though, higher production costs may not be enough to explain the company’s latest attempt to raise prices. Forecasts indicate that for 2023, Pepsi is on track for earnings growth of 13 percent and revenue growth of 10 percent.
Discussion Questions:
1. Carrefour has deemed efforts to increase prices by Pepsi as “unnecessary.” Did Pepsi misread its market? Where should Pepsi go from here? Does Carrefour have the upper hand in price negotiations?
2. What are the implications of Carrefour’s rejection of Pepsi’s most recent attempt to raise prices for the soft drink and snack food market in France and other affected countries? Is Coca Cola a substitute for Pepsi Cola? How would you describe demand for Pepsi products? Is it elastic or inelastic?
3. As a stockholder in Pepsi Co., what is your reaction to the situation in France and the other markets affected by Carrefour’s decision not to stock Pepsi products?
Source| Reuters:https://www.reuters.com/markets/us/carrefour-says-it-will-not-sell-pepsico-goods-due-price-hikes-2024-01-04/; BBC: https://www.bbc.com/news/business-67884603; WSJ: https://www.wsj.com/business/retail/frances-carrefour-halts-pepsico-product-sales-over-price-hikes-c89ae35a; Unsplash: Photo by Qasim Malick on Unsplash