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Unilever/Tesco row: Are Nestlé & Ferrero next? says Euromonitor

By Jenny Eagle+

13-Oct-2016
Last updated on 13-Oct-2016 at 19:58 GMT2016-10-13T19:58:13Z

Unilever sells household brands including Ben & Jerry's ice cream. However, on Tesco's shopping website, Ben & Jerry's and Magnum are among the products showing up as currently unavailable.
Unilever sells household brands including Ben & Jerry's ice cream. However, on Tesco's shopping website, Ben & Jerry's and Magnum are among the products showing up as currently unavailable.

A row has broken out between Unilever and Tesco over price hikes.

The supermarket giant has allegedly rejected a Unilever request to increase prices by up to 10% because of the fall in the value of sterling. 

Brexit has been the trigger

 

Pinar Hosafci

Unilever manufactures brands including Ben & Jerry's ice cream, Magnum, Marmite, Hellmann's mayonnaise and Pot Noodle. 

Many of these products have been taken down on Tesco's website and the supermarket says it will not replenish stocks once existing supplies sell out. 

The supermarket CEO, Dave Lewis, was reportedly Unilever’s former UK and Ireland chairman.

Pinar Hosafci, senior food analyst, Euromonitor International, said Brexit has been the trigger that started this and it is likely that other companies, which are reporting in Euros, including Nestlé and Ferrero, will follow suit. 

This is not the first time Tesco is pressuring suppliers to drop prices. Since March 2015, the leading UK grocery retailer has been squeezing the biggest food brands in the world by its price wars, removing Kingsmill and Rachel Organics from its stores,” she said. 

However, this time around the move has been initiated by Unilever and across its entire portfolio of its products. This move could be more detrimental to Tesco than Unilever, which owns a number of power brands that are either leading or at best ranking in second place in their respective categories.” 

The pound has fallen 17% since June

According to Euromonitor’s latest data, the company has 37% share in ice cream, 21% share in table sauces and owns the single largest yeast based brand – Marmite - with 85%. 

It is a company Tesco cannot afford to ignore. 

This is likely to be a short term phenomenon,” added Hosafci. 

In the long run, UK’s leading retailer and one of the leading food manufacturers are likely to negotiate a deal that will bring them together. Otherwise, Tesco might risk of shedding further market share.” 

The pound has fallen 17% since June's vote for the UK to leave the European Union. 

A spokesperson for Tesco said, "We are currently experiencing availability issues on a number of Unilever products. We hope to have this issue resolved soon." 

Other products affected by the dispute include Colman's mustard, PG Tips, Bovril, Stork, Flora, and Wall's ice cream. 

In response to the announcement, Graeme Pitkethly, CFO, Unilever, said price increases to offset rising costs were a normal part of doing business. 

He said he was confident the dispute would be “resolved pretty quickly.” 

A spokesman for Nestlé said:"At Nestlé we are used to dealing with all of the variables that could affect our cost pricing, including fluctuations in currency. We constantly review those costs and we will continue to manage all of these factors within Nestlé with a view to making cost price increases only when absolutely necessary to maintain the high quality of the products our consumers love."

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