Tesco in love-hate battle with suppliers
TESCO’S public row with Unilever is the first skirmish in a series of price disputes between supermarkets and food producers and consumer goods firms, retail experts warn.
Tesco and Unilever had a public spat over pricing
Britain’s biggest supermarket was at loggerheads with consumer goods giant Unilever last week, over its demand for a 10 per cent increase in the wholesale prices of its entire product range.
Unilever wanted to impose the price rise to offset the collapse of sterling, which has increased its costs, but Tesco retaliated by removing its household brands, which include Marmite and Hellmann’s mayonnaise, from its website.
Although the Anglo-Dutch company announced an end to the dispute on Thursday night, retail sector observers say that food producers and household goods manufacturers are holding talks with super markets about raising their prices.
Retail Remedy partner Phil Dorrell said: “There are conversations going on now and all of the food producers and consumer goods firms are asking for more money.”
Weak pound prompts price punch-up between Tesco and Unilever
Bruno Monteyne, retail analyst at investment manager Alliance-Bernstein, said that the price row would not be a one-off incident: “This is not just about Tesco and Unilever. It is about all UK retailers and suppliers.”
While politicians can deny reality, a shampoo produced on the continent is now 18 per cent more expensive
According to Alliance-Bernstein, shoppers have enjoyed years of falling prices and currently spend a record low of 12.1 per cent of their disposable income on food.
However, former Tesco executive Monteyne said that the negotiations between retailers and their suppliers will eventually lead to increased costs for consumers: “While politicians can deny reality, a shampoo produced on the continent is now 18 per cent more expensive.”
Unilever demanded a 10 per cent price inrease to offset the collapse of the pound
Aside from Marmite and Hellmann’s, Unilever’s product range includes Pot Noodle, Ben & Jerry’s ice cream and Domestos bleach.
On Thursday it said that turnover for the third quarter was fl at at ¤13.4 billion (£12 billion) and that its underlying sales were 3.2 per cent higher.
More price wars are expected as producers hold talks about price risers
On Friday Bank of England Governor Mark Carney warned that the collapse in the value of sterling, which has lost nearly a fifth of its value against the US dollar since June 23, would push up inflation and prices across the whole economy.
Food will rise in cost first and Carney said that life for those on lower incomes is “going to get difficult” as the UK moves from “no inflation to some inflation”.