Weak pound prompts price punch-up between Tesco and Unilever
euronews (in English)
2016-10-13
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The plunge in the value of the pound has prompted a pricing row with Britain’s biggest retailer – Tesco – halting online sales of top-selling items produced by Unilever.
The pound’s fall since a referendum vote decided Britain will leave the European Union has left suppliers and supermarkets battling for profits as imported goods become more expensive.
Tesco’s boss Dave Lewis said: “Since the referendum we have not increased prices. Since the referendum, actually, our prices have continued to go down. I can’t tell you what the exchange rate will do to the supply base going forward, it depends on the level. What I can give you as a commitment is, it’s not our intention to let prices flow through to retail inflation if it is at all avoidable.”
That will be difficult when Unilever, one of the world’s biggest consumer goods producers, has reportedly demanded prices increased of 10 percent across a wide range of goods.
It is understood to have asked for the same of Britain’s big four supermarkets – Tesco, Sainsbury’s, Asda and Morrisons. The others have not spoken publically about their position.
Unilever’s products include Persil washing powder, Ben & Jerry’s ice cream and Marmite, a brown yeast-extract spread which is among Britain’s best loved brands.
Brexit connection
One shopper outside a London Tesco store didn’t see a connection with Brexit: “If prices go up it’s going to be very difficult for people who are at the low end in terms of earnings. It’s bad enough as it is and Unilever are saying it’s something to do with us coming out of Europe but I don’t see how it can be anything to do with that really.”
But another shopper placed the blame firmly on the those who voted to leave the EU: “I think people didn’t really understand what they were voting for when they were voting for Brexit. They were voting for other reasons and they just didn’t consider the economic repercussions; so now why is it a surprise?”
Tesco’s boss Dave Lewis – who ironically was previously a senior executive at Unilever – points out some of the items involved – such as Marmite – are made in Britain.
Unilever argues the price increases are part of “a normal devaluation led cycle” adding they are “substantially less” than what’s needed to cover the impact on its profits.
The two companies will now have to hammer out a compromise.
And other retailers will face the same issues.
Bruno Monteyne, a former senior Tesco executive who is now an analyst at Bernstein, said: “While politicians can deny reality, a shampoo produced on the continent is now 17 percent more expensive. This isn’t about Tesco or Unilever but about all UK retailers and suppliers.”
The numbers
The pound is down 19 percent against the US dollar and about 16 percent against the euro since the Brexit vote.
The average price for a basket of 35 commonly bought goods cost 83.19 pounds (92.04 euros) in September, according to price tracker mySupermarket.co.uk, up 57 pence from May, t
The pound’s fall since a referendum vote decided Britain will leave the European Union has left suppliers and supermarkets battling for profits as imported goods become more expensive.
Tesco’s boss Dave Lewis said: “Since the referendum we have not increased prices. Since the referendum, actually, our prices have continued to go down. I can’t tell you what the exchange rate will do to the supply base going forward, it depends on the level. What I can give you as a commitment is, it’s not our intention to let prices flow through to retail inflation if it is at all avoidable.”
That will be difficult when Unilever, one of the world’s biggest consumer goods producers, has reportedly demanded prices increased of 10 percent across a wide range of goods.
It is understood to have asked for the same of Britain’s big four supermarkets – Tesco, Sainsbury’s, Asda and Morrisons. The others have not spoken publically about their position.
Unilever’s products include Persil washing powder, Ben & Jerry’s ice cream and Marmite, a brown yeast-extract spread which is among Britain’s best loved brands.
Brexit connection
One shopper outside a London Tesco store didn’t see a connection with Brexit: “If prices go up it’s going to be very difficult for people who are at the low end in terms of earnings. It’s bad enough as it is and Unilever are saying it’s something to do with us coming out of Europe but I don’t see how it can be anything to do with that really.”
But another shopper placed the blame firmly on the those who voted to leave the EU: “I think people didn’t really understand what they were voting for when they were voting for Brexit. They were voting for other reasons and they just didn’t consider the economic repercussions; so now why is it a surprise?”
Tesco’s boss Dave Lewis – who ironically was previously a senior executive at Unilever – points out some of the items involved – such as Marmite – are made in Britain.
Unilever argues the price increases are part of “a normal devaluation led cycle” adding they are “substantially less” than what’s needed to cover the impact on its profits.
The two companies will now have to hammer out a compromise.
And other retailers will face the same issues.
Bruno Monteyne, a former senior Tesco executive who is now an analyst at Bernstein, said: “While politicians can deny reality, a shampoo produced on the continent is now 17 percent more expensive. This isn’t about Tesco or Unilever but about all UK retailers and suppliers.”
The numbers
The pound is down 19 percent against the US dollar and about 16 percent against the euro since the Brexit vote.
The average price for a basket of 35 commonly bought goods cost 83.19 pounds (92.04 euros) in September, according to price tracker mySupermarket.co.uk, up 57 pence from May, t
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