Tesco is running short of stocks of a range of household brands from Marmite to Comfort fabric conditioner after a row with its major supplier Unilever.
It is understood that Unilever has halted deliveries to Tesco after a dispute over price. The food, toiletries and household goods supplier has been attempting to raise prices across a wide range of goods by about 10%, blaming the falling value of the pound against the euro and the dollar.
The row will be embarrassing for the supermarket’s chief executive, Dave Lewis, who previously held a senior role at Unilever. It also comes after Tesco made sweeping changes to the way its buyers deal with suppliers after strong criticism from the industry watchdog, the Grocery Code Adjudicator.
A Tesco spokesperson said: “We are 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.”
Unilever is one of the UK’s biggest suppliers of branded foods and household goods and the dispute could have serious consequences for both sides.
In different areas of the country a number of Unilever brands have sold out. They include Persil, Surf, Dove, Comfort, Ben & Jerry’s ice cream, Elmlea, Colman’s, Helmann’s, Marmite, Knorr, Bertolli, Flora, Comfort and Pot Noodle. The items are not available on the Tesco website.
It is understood that Unilever has approached a number of the major retailers in an attempt to increase prices. One well-informed source said: “Unilever is using Brexit as an excuse to raise prices, even on products that are made in the UK.”
Bryan Roberts, a retail analyst at TCC Global, said Unilever’s attempt to increase prices was not surprising and reflected attempts by a large number of supermarket suppliers to offset cost increases. He suggested there were likely to be more disputes between retailers and suppliers.
“A lot of suppliers are seeking to pass on price increases to retailers but in the current environment retailers are increasingly reluctant to take it. They want to keep prices as low as they can to increase their affordability against the competition.”
It emerged earlier this week that confidence in the food and drink industry is increasingly fragile since the upheaval caused by the result of the EU referendum in June.
Ged Futter, a retail consultant at IR Solutions, which advises suppliers on how to negotiate with retailers, said the fall in the value of the pound was having a huge impact on those importing goods. “A lot of suppliers have seen costs go up significantly because of currency. Some are covered until the end of the year but not beyond. Retailers are saying they can’t pass cost increases on to their shoppers but that has to happen, or they are not going to have any suppliers left,” he said.
Details of the standoff between Tesco and Unilever emerged just a few hours after Justin King, a former boss of Sainsbury’s, warned that supermarkets could not absorb cost increases caused by the falling pound and that price rises were inevitable.
Serious disputes over price are not that unusual in the grocery sector. Roberts said it was usually the retailer who ended up backing down because shoppers demanded certain brands.
In 2011, Tesco refused to stock a number of Premier Foods’ brands, including Oxo and Ambrosia, after the supplier tried to pass on a 14% increase in costs. The two fell out the previous year over Hovis when Premier, citing soaring wheat prices, tried to raise the price of its loaves.
Unilever declined to comment on the dispute with Tesco.