On Monday, the dispute over food prices reached a new peak as PepsiCo announced that the corporation had initiated the break of business relationship with the supermarket chain Carrefour. The soft drink giant stated that it would cease supplying the European branches of the chain as no agreement could be reached on a new contract.

The conflict became public on Thursday when Carrefour announced that PepsiCo products such as Pepsi, Lay's, Doritos, Cheetos, Quaker Oats, and others would be immediately removed from the shelves of French, Italian, Spanish, and Belgian stores.

According to information from Bernstein analyst Callum Elliott, these branches account for approximately 0.25% of PepsiCo's worldwide sales. However, now the spokesperson for PepsiCo claims: "Unfortunately, Carrefour has misrepresented the sequence of events. Since we were unable to reach a new agreement, we had already stopped supplying them at the end of last year, which was known to the company.

"We hope to reach an agreement soon so that our products are available again on the shelves for consumers." Carrefour stated on Monday: "We, the Carrefour group, have made this decision." PepsiCo and Carrefour have been negotiating new price lists for several months while the French government puts pressure on suppliers to come to lower price agreements with retailers.

Food inflation in France has risen by double digits in 2022 and reached nearly 16% in March 2023. In August, French Finance Minister Bruno Le Maire stated that Unilever, Nestlé, and PepsiCo would not participate in a tariff agreement closed by his ministry with retailers and producers to freeze thousands of products or lower prices.

The Mayor announced to force food manufacturers to start annual price negotiations with food retailers earlier than usual in order to lower prices starting in January. Carrefour has already publicly criticized suppliers since the summer and increased pressure on them to lower prices. In August, Carrefour's CEO, Alexandre Bompard, blamed suppliers for the significant price increases.

"The reality is that these industry players have refused to renegotiate prices, despite declining inflation and pressure from authorities," Bompard told Franceinfo. In September, Carrefour started labeling products to warn consumers about the so-called "shrinkage factor."

The affected products included Lay's potato chips and Lipton iced tea, both manufactured by PepsiCo. Bompard referred to the "shrink factor," which means a lower quantity of product in the packaging at the same retail price, as "an unacceptable practice." According to a person familiar with the matter, negotiations between PepsiCo and Carrefour have been ongoing for six months.

PepsiCo warned Carrefour that delivery would be halted if no agreement is reached by the end of 2023 and that supplies would be depleted by December 31st. The spokesperson for PepsiCo stated that negotiations with Carrefour not only concern prices, but also focus on customer satisfaction and loyalty.

"We are constantly thinking about consumer prices and loyalty. However, we cannot maintain business relationships that are no longer profitable." In October, PepsiCo's CFO, Hugh Johnston, stated to the Wall Street Journal that price increases in 2024 would progress at a slower pace and would be approximately in line with overall inflation.

This follows more than two years of sharp price increases by PepsiCo on soft drinks, snacks, and packaged foods. It would not be the first time that PepsiCo has stopped deliveries to a food retailer during price negotiations. The company halted deliveries to Loblaw in Canada for over a month in 2022. Disputes have also erupted on the shelves of grocery stores in the UK.

In 2022, Kraft Heinz temporarily halted deliveries of beans, soups, and ketchup to Tesco, one of the largest retailers in the world. While this dispute remains unresolved, Mars has discontinued the delivery of Whiskas cat food, Pedigree dog food, and other pet care brands to Tesco.