Photo by Tesco PLC, Flickr Creative Commons.
Unilever has settled a very public dispute with Tesco, reportedly with concessions, after a price row linked to the fall in the pound.
The consumer goods company had sought indiscriminate increases to the price of its products.
Tesco was no longer selling Unilever products – including Ben & Jerry’s ice cream, PG Tips tea, Pot Noodle and Marmite – on its website, having reportedly fought off the price increase.
Unilever’s decision was linked to the weakening of the pound since the UK’s vote to leave the European Union (EU) in June. The pound has plummeted from $1.49 before the result of the EU referendum was announced to $1.21 this morning.
This had caused it to raise the price of its products by 10%, but Tesco didn’t appear willing to take a dent to its profits or pass the rise on to consumers.
Unilever’s head of finance called the move a ‘normal’ response to fluctuations in currency and said that he was confident that the dispute would be over quickly. Graeme Pitkethly also implied that the 10% increase had already reached consumers in some parts of the market, suggesting that other retailers had accepted the price hike.
But many consumers were concerned that it will affect the availability of products, and have taken to Twitter to express their discontent.
This tendency by big corporates to blame Brexit for everything makes case for clear out of useless CEOs – Execexit? https://t.co/LnWWVtlXtY — David C Bannerman (@DCBMEP) October 13, 2016
This tendency by big corporates to blame Brexit for everything makes case for clear out of useless CEOs – Execexit? https://t.co/LnWWVtlXtY
— David C Bannerman (@DCBMEP) October 13, 2016
Many have sided with Tesco on the issue, and questioned the ethics of Unilever’s decision.
Question for #Unilever When the Pound rises, as has been the case in recent years, why did it not reduce the price of its products in the ?? — David Vance (@DVATW) October 13, 2016
Question for #Unilever When the Pound rises, as has been the case in recent years, why did it not reduce the price of its products in the ??
— David Vance (@DVATW) October 13, 2016
I hope @asda, @Morrisons, @sainsburys, @waitrose take a leaf out of @Tesco book re their stance over @Unilever hypocrisy. #Tesco #Unilever — Steve (@SteveK_UK) October 13, 2016
I hope @asda, @Morrisons, @sainsburys, @waitrose take a leaf out of @Tesco book re their stance over @Unilever hypocrisy. #Tesco #Unilever
— Steve (@SteveK_UK) October 13, 2016
The row highlights the need for FMCG suppliers to be better prepared for potential cost price discussions with supermarkets, according to Andrew Cole, joint managing director of retail analysts Bridgethorne.
“Changes in the economic environment in recent months may be placing some manufacturers under unavoidable cost pressure. With the value of sterling having hit its lowest value against the US dollar for more than ten years and its lowest against the euro for over four years, any supplier purchasing finished product, raw ingredients or packaging materials in either euros or US dollars could face a hit on its profitability.
“We are operating in economically turbulent times and, against a background of increased utilities, insurance, fuel and labour costs, many suppliers may not be able to absorb all of these costs. However, if a supplier is considering a change in cost prices, it is essential that they are not only fully prepared and are clear on their objectives but also that they take time to understand the retailer’s position in order to achieve an outcome that is mutually acceptable.
“Suppliers need to build a category-based rationale to help defend their brands. We have already had a number of clients approaching us for guidance on how to deliver a compelling argument, how to position their rationale and how to overcome retailer objections. The aim is to help them achieve collaborative trade meetings and give them the confidence to enter those conversations constructively.”
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