Fri, Oct 14, 2016 - Page 10 News List

Tesco pulls Unilever goods in row after pound plunges

Reuters, LONDON

A jar of Marmite is arranged for a photograph in Brenchley, UK, yesterday.

Photo: AFP

Britain’s biggest retailer Tesco PLC has pulled dozens of Unilever PLC brands from its Web site in a row over pricing sparked by the Brexit-induced plunge in the pound, one of the most vivid signs to date of how the referendum could hurt consumers.

The dispute between two of Europe’s best-known companies means popular products such as Marmite and PG Tips tea bags will no longer be available via Tesco’s Web site, the country’s biggest online retailer.

The row shows how Britain’s decision to quit the EU has exacerbated tensions between suppliers and retailers, with both sides battling for profits as the fall in the pound hits margins on imported goods.

Unilever has been trying to raise the prices it charges Britain’s big four supermarkets — Tesco, Sainsbury’s PLC, Asda Stores Ltd and Morrisons Supermarkets PLC — across a wide range of goods by about 10 percent, saying it needs to offset the higher cost of imported commodities, two people with knowledge of the situation told reporters.

One person with knowledge of the situation at a big-four grocer said they had protested against Unilever’s demands, adding that some of the products they wanted to charge more for are actually made in Britain.

“What’s really a problem is when a supplier like Unilever comes and asks for across the board cost increases and there’s no negotiation, there’s no discussion. That’s been the approach that’s upset the grocers,” he said.

Speaking as the firm reported results, Unilever chief financial officer Graeme Pitkethly said price increases taken to offset rising costs are a normal part of doing business, but he declined to comment specifically on the row with Tesco.

As of Wednesday evening, Unilever products — including Marmite, Ben & Jerry’s ice cream, Lynx body spray and PG tips tea — were unavailable on Tesco’s Web site, but the shortage had not yet affected stores, a Tesco spokesman said.

“We are currently experiencing availability issues on a number of Unilever products. We always work to ensure customers get the best possible prices and we hope to have this issue resolved soon,” he said.

A spokesman for Unilever declined to comment.

Last week, Tesco chief executive Dave Lewis, a former senior Unilever executive, hailed a transformed relationship with suppliers as a major factor in the grocer reporting a 60 percent rise in first-half profit and the setting of tougher profitability targets.

However, he indicated it was not a given that suppliers should be able to recoup the cost of the falling pound as they had not always passed on benefits when sterling was much stronger.

Since Britain’s shock Brexit decision in June its currency has plunged almost 18 percent against the US dollar.

Most analysts and economists believe that the pound’s slump could lead to higher grocery prices, following years of deflation due to a price war between the big chains.

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