Fmcg giant Unilever and Tesco are understood to be at loggerheads after the retail giant snubbed its demand for price hikes, leading to a raft of household name goods becoming unavailable via Tesco.com.
The retailer confirmed today that it was suffering from “availability issues”, with products affected including Hellmann’s mayonnaise, Marmite, Ben & Jerry’s ice cream, Knorr stock cubes and Pot Noodles.
It is understood talks broke down between Unilever and Tesco, whose CEO Dave Lewis, a former UK boss of the supplier, spoke only last week about the company’s determination not to allow supplier cost hikes to hit Tesco shoppers in the pocket.
Sources said talks were believed to have broken down only recently and that so far only online availability had been hit.
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.”
Tesco declined to comment on speculation that Unilever had approached it with a demand for a 10% price increase.
However, the need for the likes of Tesco to keep prices down is flying in the face of a looming crisis facing suppliers. Today a Food and Drink Federation survey revealed that 75% of respondents said prices of their ingredients and raw materials had increased since the EU referendum vote.
One company said it had seen the cost of raw materials shoot up by 20%, and the survey also found 63% of respondents reported a decrease in profit margins.
After unveiling Tesco H1 results last week, at which he vowed to increase Tesco’s profit margins in the next three years, When asked by The Grocer how he planned to cope with demands for price hikes from suppliers hit by the weakness of the pound, Lewis said Tesco would be much more symapthetic towards suppliers who passed the benefit on to customers in terms of lower prices when the currency moved in the other direction a few years ago.
“Where that didn’t happen when the exchange rate moved in the other direction then we will be a little more challenging about why when it moves in one direction the customer pays for it and when it moves in other directions the customer doesn’t get the benefit; we are not so comfortable with that way of thinking and we would be challenging in that space.”
And “But we would be very challenging with anybody who was thinking of taking an exchange rate move to justify a price increase just on the back of that alone.”
The Grocer has approached Unilever for a comment.
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