In Carrefour’s recent standoff with PepsiCo over price increases, the French retailer made a dramatic choice by removing its products. The empty shelf space was actually marked with signs announcing “we are no longer selling this brand due to unacceptable price increases”.
It’s common now for retailers to take an early saintly PR position in these battles, but this one also had a certain French flair, don’t you think?
PepsiCo’s narrative differs, of course. It paints Carrefour as a provocateur demanding exorbitant margins. Carrefour’s refusal to settle invoices in full led PepsiCo to halt deliveries, it maintains.
On the surface, this tiff seems monumental. But remember that in France, soft drinks and snacks hold less sway than in the UK. Still, the situation is far from ideal, especially for PepsiCo’s Carrefour account manager.
This isn’t a novel scenario. A few years back, Walmart delisted a multinational supplier’s products in the US over a dispute with (then Walmart-owned) Asda in the UK. And these types of action are set to increase, given the sensitivity of pricing in today’s market. It’s an inevitability as standard negotiation carries on unchecked, and retailers decide the PR win is worth cutting off their trading profit nose.
Such escalating retailer-supplier tensions are bad for both parties, but suppliers must tread especially carefully. Larger suppliers, with their hefty sales targets and intricate politics, are vulnerable. They struggle to hold any PR ground at all amongst shoppers.
Suppliers: never reward the blackmail. If you do, you are setting yourself up for a lifetime of pain. Here are some tips to use in your approach.
Firstly, keep it professional and polite, and explain the financial and share consequences to the retailer of their actions.
Secondly, if they are refusing to pay the agreed costs or accept a CPI, then stop supply.
Thirdly, over-invest in the troublesome retailer’s competitors: more promotions, more tailored activities and advertising. Drive share of market in competitors to damage the retailer who has taken action against you.
Next, ensure unification of the sales team. Share the need to make up for the lost volume and collectively strive to offset lost volumes, rather than leaving the individual account manager alone in the challenge.
All the while maintain an open line in communications with the retailer, though never indicate a softening of intention regarding the core issue. Quite often a wider multifunctional team can help keep these lines of communication open.
Crucially, ensure senior management’s endorsement of this steadfast approach, and be prepared for a protracted standoff if necessary. Transparency about your strategy across the industry can also serve as a deterrent. Retailers must see your resolve so they are never tempted again to take this approach with you.
The alternative is far grimmer: a state of perpetual capitulation.
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