Tesco pulls Unilever goods from website over price row

Wed Oct 12, 2016 7:27pm EDT
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LONDON (Reuters) - Tesco (TSCO.L: Quote), Britain's biggest grocery chain, has pulled dozens of Unilever (ULVR.L: Quote) (UNc.AS: Quote) brand products from its website after a disagreement over prices in the wake of a partly Brexit-driven slump in the British currency.

The dispute between two of Britain's best-known companies shows how the UK's decision to quit the European Union has exacerbated tensions between suppliers and retailers, which are battling for profits as consumers are increasingly savvy about their shopping.

Unilever has been trying to raise the prices it charges Britain's big four supermarkets - Tesco, Sainsbury's (SBRY.L: Quote), Asda (WMT.N: Quote) and Morrisons (MRW.L: Quote) - 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 Reuters.

One person with knowledge of the situation at a big four grocer said they had protested against Unilever's demands, noting 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, adding that no decision had been made whether to accept Unilever's demand or delist some products.

As of Wednesday evening, Unilever products - including Marmite spread, Ben & Jerry's ice cream, Lynx body spray and PG tips tea - were unavailable on Tesco's website, 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, which will report financial results on Thursday, declined to comment.

Last week, Tesco boss 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. But 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.   Continued...

A company logo is pictured outside a Tesco  supermarket in Altrincham northern England, April 16, 2016. REUTERS/Phil Noble/File Photo