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Europe Retailers Warn of Price Surge Amid Middle East conflict

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European retailers are warning of rising prices and weakening consumer demand as the ongoing Middle East conflict drives up energy and transportation costs. Companies across the sector say prolonged disruption could fuel inflation, with oil prices already climbing above $100 per barrel and increasing pressure on global supply chains.

Major retailers including H&M and Next have signalled potential price increases in the coming months. While short-term hikes may remain modest, executives caution that prolonged conflict could push prices significantly higher, particularly as manufacturing and freight costs rise. Firms are relying on flexible supply chains to manage uncertainty but acknowledge growing risks.

At the same time, consumer confidence across Europe is weakening, with falling retail sales and declining sentiment in countries such as the UK, Germany, and Italy. Retailers like Co-op warn that households are becoming more cautious amid rising living costs, and further escalation of the conflict could intensify inflationary pressures, dampening spending and slowing economic growth.

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Carrefour to halt Pepsi sales over price rises

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French supermarket giant Carrefour has announced its decision to cease selling Pepsi products in its stores due to what it deems “unacceptable price increases.” The move, affecting items like Pepsi soda, Doritos, and Quaker cereals, was communicated to customers through signs displayed in stores. Pepsi has expressed its commitment to continuing negotiations in “good faith” despite the disagreement.

The disagreement arises amid France’s struggle with rapidly increasing food prices, as indicated by a recent report showing a 7.1% rise in food prices in December compared to the previous year. French Finance Minister Bruno Le Maire has been urging major food companies to lower prices and has even threatened special taxes on what he considers “undue” profits. The government has accelerated the deadline for price negotiations between food companies and supermarkets in an attempt to address the issue.

Pepsi, citing rising costs, has implemented price increases in recent years, with expectations of further hikes in 2024. The company has also faced criticism for “shrinkflation,” reducing product sizes without corresponding price decreases. Carrefour, as the second-largest grocer in France, has been notably resistant to this practice and, in September, displayed signs highlighting “shrinkflation” on certain products, including Lipton Ice Tea, a Pepsi brand.

Carrefour’s decision to no longer sell Pepsi products is accompanied by notices explaining the move as a response to “unacceptable price increases.” Despite this decision, existing Pepsi products on the shelves will still be available for purchase by French consumers. Pepsi has stated that discussions with Carrefour have been ongoing for months, and they remain committed to finding a resolution to ensure their products’ availability.

While public disputes over pricing are unusual, they are not unprecedented. In 2022, Tesco clashed with Kraft Heinz over price hikes for staples like baked beans and ketchup. Similarly, German grocers Edeka and Rewe halted sales of certain Mars products, citing price increases. Edeka also faced a dispute with Pepsi in the previous year, and a standoff between Mondelez, the maker of Milka chocolate, and Belgian supermarket Colruyt resulted in a supply gap last year.

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