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Tesco falls into dispute with Unilever over falling value of the pound

A disagreement between retailer Tesco and multinational Unilever over costs related to the falling pound and Brexit, means that Tesco stores are running low on several products.

The University of Salford Business School experts have comment on the issue, which could be the first of the real-life impacts of the Brexit vote.

Dr Muhammad Amjad, expert in international strategy at The University of Salford, said that Tesco could be using the argument to push their own brand product lines. He added:  “There is a divide as to how corporations are thinking about Brexit and how Brexit I thought by the Government and the people and this is the first sign of that.

“This gives an opportunity for supermarkets to push their own brands, the ones that are competing with products from the likes of Unilever, these stores have huge power, which smaller retailers will not be able to compete with. For corporations it gives the muscle.

“This is a serious throw of the dice from Tesco, they don’t know what then outcome will be and this is a process that we will see a lot more of.”

Dr Jonathan Owens, expert in Operations and Supply Chain Management, said: “Today’s news about Tesco and Unilever is perhaps nothing new as these negotiations go on all the time between supplier and retailer.  However, this time these negotiations have become public and it does seem to be a real battle of giants at the moment. 

“Perhaps due to the volatility of the pound, Tesco making this very public stance has a real opportunity to be seen as standing up for the consumer and perhaps recognised as a consumer champion.  It won’t take long to see what the consumer thinks either. 

“Supermarkets don’t hold much stock these days, particularly as they operate in an era of reduced working capital.  So will the consumer stay loyal and choose an alternative brand when stocks run out…we’ll just have to wait and see.  At the other end of the supply chain, you can bet Unilever won’t just be discussing these price rises with just Tesco, but across the sector.  So, the big question is will the supermarket sector join forces and then we might see a gigantic battle of giants.”  

And Dr Gordon Fletcher, International Operations and Information Management, said:The Mexican standoff between Tesco and Unilever is a revealing insight into the behind the scenes world of the UK high street. 

“The fact that this very public disagreement pitches Tesco's CEO against his former employer reflects the very small number of people who are in charge of putting goods onto retail shelves in the high street. Unilever's long term strategy of buying up many of the most popular household brands in the UK and elsewhere also reveals how few companies ultimately own the UK's most iconic household brands. 

“With complex global supply chains that don't buy and sell in British pounds, intense pricing competition from other large high street retailers and a market niche that relies up recognisable brands being sold competitively the tension that is being reported is not surprising nor is it an unusual occurrence. What is remarkable is that these two large organisations should choose to make their dispute so visible. Brexit is the label for many things but tensions between retailer and wholesalers - and particularly ones based on pricing - is nothing new.

“Brexit and currency fluctuations aside, the competition that Tesco faces from other retail business models is also a factor in this current tension. Unilever has a leverage that it previously could not so readily enjoy. Amazon, for example, is still happily selling Marmite and Hellmans Mayonnaise in a variety of sizes, choices and variants that are rarely seen on high street selves. The alternative retail business model, with Aldi and Lidl being the most recognisable examples, are also still offering their own variants of yeast extract spread. 

“Perhaps Tesco could approach the Australians for their own version of yeast extract spread. That iconic food brand was snapped up by Mondelez International - one of the very few other owners of iconic food brands on our high street shelves.

  • Date published: 13th October 2016

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