French retail chain Carrefour takes action against "shrinkflation". Here's why

Carrefour, a leading French retail chain, has launched a campaign to combat "shrinkflation," adding price warnings on a variety of goods, including Lindt chocolates and Lipton iced tea.

The action is intended to put pressure on significant consumer products suppliers like Nestle, PepsiCo, and Unilever to reduce prices, and also prepares the ground for crucial contract negotiations that are scheduled to be finished by October 15.

Even as raw material costs have begun to decline, Carrefour has started identifying goods that have increased in price but have shrunk in size. The objective is to gain consumer support as retailers get ready for significant negotiations with some of the biggest brands in the world.

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Reuters quoted Stefen Bompais, Director of Client Communications at Carrefour, as saying that the intent behind the initiative, saying, "Obviously, the aim in stigmatising these products is to be able to tell manufacturers to rethink their pricing policy."

Despite a drop in the cost of raw materials, Carrefour's CEO, Alexandre Bompard, who also serves as the head of the retail sector advocacy group FDC, has often expressed his concerns about the failure of consumer goods producers to cooperate in lowering the prices of various basics.

Bruno Le Maire, France's finance minister, has echoed these worries by calling 75 significant shops and consumer advocacy organisations in June to demand price reductions. Le Maire singled out Unilever, Nestle, and PepsiCo as firms not reaching pricing expectations following a new round of meetings last month.

Starting from Monday, Carrefour has labelled 26 products in its French stores with tags reading, “This product has seen its volume or weight fall and the effective price by the supplier rise.”

For instance, PepsiCo lowered the size of a bottle of its sugar-free, peach-flavored Lipton Iced Tea from 1.5 to 1.25 litres, resulting in a 40 per cent rise in the actual price per litre. Infant formula from Nestle, Guigoz, was reduced from 900 grams to 830 grams, and the Viennetta ice-cream cake from Unilever was reduced from 350 grams to 320 grams.

Consumer advocacy groups contend that retailers like Carrefour use "shrinkflation" on their private label products, making it a common practice.

With varying degrees of success, France and other European countries have been forcing large corporations to freeze or lower food and transport prices for several months to ease consumer woes brought on by rising living costs.

Bompais said that Carrefour has issued shrinkflation warnings in all its French stores and will continue to do so until the targeted suppliers agree to lower prices.

Although the shop could apply warnings to other products, it does not currently have plans to expand this programme.

(With inputs from Reuters)

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