Tesco v Unilever: what the analysts say

Thursday 13th October 2016

Food and drink expert Mark Jones comments on the Tesco v Unilever price war. Unilever wants to raise its prices by about 10% to compensate for the steep drop in the value of the pound following the Brexit vote earlier this year.

Mark said: “The difference with Unilever is that, unlike most suppliers, it usually trades on its own terms, not the retailer’s terms. In most cases, the suppliers have an agreement for at least one year and the price payable for the goods is fixed.

“When asked if prices can be increased because of currency fluctuations, in almost all cases the retailer will say ‘no, we have a contract and an agreed price’. Persuading retailers to give some ground on price is even more challenging at present because of a grocery price war.”

“Unilever however is one of the few suppliers who can negotiate with the big retailers on a level – or in most cases higher – playing field. In fact, with so many big name brands, Unilever claims that 98% of households in the UK have at least one of its products in it.

“For that reason, a compromise looks inevitable. Tesco will not allow its customers to go elsewhere to find the products they like, and Unilever will not want its products to be off the shelves in such a large retailer. I doubt many Tesco customers will be left reaching for Tesco’s own yeast extract in place of Marmite.”

Coverage of the article can be found on The Express and The Grocer (subscription required).

If you would like to discuss this article in further detail, please contact Mark on 0113 227 0297 or at mark.jones@gordonsllp.com