PepsiCo, Grocery Giant Bicker Over Who Dumped Whom

PepsiCo said that it had decided to stop supplying the chain’s European stores because the two sides hadn’t reached an agreement on a new contract.

The impasse spilled into public view Thursday when Carrefour said it would stop selling Pepsi, Lay’s, Doritos, Cheetos, Quaker Oats and other PepsiCo products in France, Italy, Spain and Belgium. Carrefour posted notes on store shelves saying it would no longer carry the brands because of unacceptable price increases. Carrefour stores in those four countries represent about 0.25% of PepsiCo’s global revenue, according to Bernstein analyst Callum Elliott.

“Regrettably, Carrefour has mischaracterized the chain of events,” a PepsiCo spokesman said Monday. “Given the lack of agreement on a new contract, we stopped supplying to Carrefour at the end of the year, something they were aware could happen. We hope we can agree on terms soon so our products can be back on their shelves for consumers to enjoy.”

In response, Carrefour said Monday: “We, at the Carrefour Group, have taken this decision.”

PepsiCo and Carrefour have been in negotiations for several months on new price listings as the French government has pressured suppliers to come to agreements with retailers on lower prices. Food-price inflation in France surged into double digits in 2022 and reached nearly 16% in March 2023.

In August, the French finance minister, Bruno Le Maire, said Unilever, Nestlé and PepsiCo weren’t cooperating in a broad agreement his ministry had forged with retailers and producers to freeze or cut prices on thousands of products. Le Maire said the government would force food producers to start annual price negotiations with grocers months earlier than usual, with the aim of implementing price cuts in January.

Carrefour since last summer has been publicly calling out suppliers and increasing pressure on them to come down on prices. In August, Carrefour Chief Executive Alexandre Bompard blamed suppliers for soaring prices.

“The reality is that these industry players have refused to renegotiate prices, despite falling inflation and despite pressure from the authorities,” Bompard told Franceinfo.

In September, Carrefour attached labels to products warning shoppers of what it described as “shrinkflation.” The products included Lay’s potato chips and Lipton ice tea, both made by PepsiCo. Bompard called shrinkflation—a smaller quantity of product in a package for the same retail price—an “unacceptable practice.”

Carrefour and PepsiCo have been negotiating for the past six months, according to a person familiar with the matter. PepsiCo warned Carrefour that if the two parties didn’t have a contract in place by the end of 2023, PepsiCo would stop supplying Carrefour and supplies would be exhausted by Dec. 31, this person said.

PepsiCo’s negotiations with Carrefour involve more than just pricing, the PepsiCo spokesman said.

“Consumer pricing and consumer loyalty are things we think about constantly,” he said. “However, we cannot sustain customer relationships which are no longer profitable.”

In October, PepsiCo finance chief Hugh Johnston told The Wall Street Journal that its price increases would slow in 2024 and would be roughly in line with the overall rate of inflation. The slowdown follows more than two years of sharp price increases by PepsiCo on its soft drinks, snacks and packaged foods.

This wouldn’t be the first time PepsiCo has halted supplies to a grocer during pricing negotiations. PepsiCo suspended shipments to Loblaw in Canada for more than a month in 2022.

Other disputes have tumbled into the grocery aisles in the U.K. In 2022, Kraft Heinz temporarily halted supplies of beans, soups and ketchup to Tesco, one of the world’s largest grocers. While that fight was still unresolved, Mars suspended supplies to Tesco of Whiskas cat food, Pedigree dog food and other pet-care brands.

Trefor Moss contributed to this article.

Write to Jennifer Maloney at Jennifer.Maloney@wsj.com