Finding Pepsi, Ice Tea or Lay’s crisps in Super U’s will now feel like an unwinnable treasure hunt. The retail brand has decided to no longer put PepsiCo group products on the shelves, due to a disagreement over prices. The case is nothing new, informs Yves Marin, consumer and retail expert: “A similar conflict had taken place between Danone and the Intermarché and Casino brands. For months, the group’s waters were no longer available on the shelves”, again the fault of a disagreement on prices. We could also cite the boycott of Get 27 by Super U and Carrefour in December, due to a non-agreement.
Negotiations made more and more explosive with inflation. If the rise in consumer prices is starting to stall (5.6% year-on-year increase in March against 6.3% in February according to INSEE), this is far from being the case for food products. : + 15.6% in one year in March, against 14.8% in February. A situation that strains large distributions as suppliers. Will the dreaded war take place between the two camps, with this new fuse lit between PepsiCo and the U group?
“The tensions could continue and expand to other brands,” said Pascale Hébel, associate director at C-Ways, a consulting firm in anticipation marketing. Especially since the climate is very, very tense on the side of the large distribution: “There is the feeling of having been wronged on the rise in prices. In 2022, the margins of manufacturers have increased, not those of distributors”, continues the specialist.
The Descrozaille tornado
Another reason for the anger, the Descrozaille law, definitively adopted last week by the parliament. Passed somewhat unnoticed with the news of the pension reform, the text nevertheless has everything of a bomb for the world of mass distribution, which will have disputed it to the end and continues to do so. “For them, this is a major loss of power,” says Pascale Hébel. It would be tedious to list all the reasons for wrath, so let’s focus on two main ones. Firstly, it will now be possible for a supplier to stop deliveries to the store if the price negotiation fails. Prior to this law, the contract was not interrupted even if negotiations failed, allowing distributors to continue to be supplied at the old rate.
Another big point of tension, non-food promotions will be capped at 34%, even on hygiene and beauty products. This limit would result in a shortfall of 232 million euros over one year for large retailers, according to a study by panelist Nielsen. This same firm had already estimated losses at 836 million euros for large retailers in 2019 due to another law, Egalim 1, supposed to allow better remuneration for farmers.
A squabble more than a real conflict?
Rising prices, tense nerves and exploding shortfalls, that’s it, we’re screwed, we won’t find any products in any store? Not so fast, the war is not yet fully declared and there are several motives that encourage pacification. Firstly, nobody has anything to gain in this conflict, recalls Yves Marin. To resume the PepsiCo-Super U battle, customers could abandon the brand which no longer displays their favorite brand, causing it to lose turnover. But on the other hand, PepsiCo is losing strategic points of sale and therefore also turnover.
Then, the big brands and suppliers cannot play the big guns indefinitely. Pascale Hébel reminds us that food sales have fallen by 7% in one year, proof that consumers are buying less to compensate for the rise in prices. However, the expert adds: “compensating for the loss in the number of sales by a continuous rise in prices will quickly reach its limits. Eventually, the consumer will get tired. It has already started: the first prices have increased by 10%, while the big brands have fallen by the same percentage” In other words, “brands also have no interest in seeing prices increase too much”.
A slow pacification?
This is moreover the bet of Yves Marin, who recalls that the negotiations were closed on February 28 and should not reopen until June: “In the meantime, the brands are not going to make requests for new prices or ask to renegotiate. This is also enough to calm things down, and consider, in the worst case, more of a cold war than a general open conflict like Super U versus PepsiCo.
The famous and much criticized Descrozaille law also obliges the intervention of a mediator in the event of non-agreement between distribution and supplier. And a last and ultimate actor could also intervene, the State. “It is difficult to ask for more effort from distribution and the consumer is at the end of its rope…”, estimates Pascale Hébel, who expects aid to intervene in the event of increases that are too high for distributors and suppliers. Your Pepsi could return to Super U sooner than expected.