Price row between Tesco and Unilever ends

Marmite is one of the Unilever products caught up in the Tesco price row. Picture: Contributed
Marmite is one of the Unilever products caught up in the Tesco price row. Picture: Contributed
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Issues surrounding the supply of leading brands including Marmite to Tesco have now been resolved, Unilever has said.

News that much-loved brands including Marmite and Hellmann’s were in short supply on Tesco shelves sparked panic among consumers as Tesco admitted it was in a stand-off with Unilever, which is believed to have demanded a 10 per cent price rise due to the falling value of sterling, halting deliveries to Tesco when it refused.

But the supplier has now said it has come to an agreement with Britain’s biggest supermarket.

“Unilever is pleased to confirm that the supply situation with Tesco in the UK and Ireland has now been successfully resolved,” Unilever said.

“We have been working together closely to reach this resolution and ensure our much-loved brands are once again fully available. For all those that missed us, thanks for all the love.”

But Leigh Sparks, professor of retail studies at Stirling University, warned that it was “inevitable” that prices would rise in supermarkets in 2017 as suppliers and retailers battled over who would absorb rising costs as a result of the falling pound and market uncertainties following the Brexit vote.

He said: “From what I understand, other retailers have had the same demands made upon them, but have not gone as public on it. It seems to be a bit of a try-on on the part of Unilever as it is a very large increase and cannot all be blamed on the falling pound as some of the products are made in Britain.”

“Underneath, however, it is definitely a signal that things will get more expensive and that manufacturers will try to push the price on to the retailer, who will push back on that if they can, but we will see a lot of price negotiations in the coming months and will inevitably see the first price inflation next year.”

Unilever chief executive Paul Polman warned in June that a vote to leave the EU’s single market would increase prices for consumers. The pound is still 5 per cent lower than a week ago, when Theresa May announced at her party’s conference that she would trigger Article 50 – which would begin Britain’s exit from the European Union – within six months.

Retail expert Heiner Evanschitzky, professor of marketing at Aston Business School, claimed that Tesco was using the dispute for its own purposes. He said: “Upsets of the kind between Tesco and Unilever are not uncommon. But what’s more unusual is that the story has been dragged into the public domain. It suggests to me that Tesco has a hidden agenda, perhaps wanting to send a message to customers that prices will go up while appearing to fight hard to keep them at a reasonable level.”

He added: “I expect we’ll see price increases in the mid-term. There shouldn’t be an immediate effect as the pound drops. But when existing contracts are renewed, wholesale prices will likely go up.”

Former chief executives of Tesco, Sainsbury’s, Asda, Morrisons, Marks & Spencer and B&Q all warned ahead of the EU referendum that a drop in the pound – coupled with supply chain disruption – would cause prices to spike.