What a headline to wake up to today ‘Battle of the Giants – Tesco takes on Unilever in row over prices’.
The interesting thing about this is that Unilever’s Chief Financial officer said on Wednesday that “the price rises had “landed” with other customers”. This implies that other retailers have accepted the price rises already, and Tesco is one of, if not the only one, to make a stand against the price increases imposed by Unilever.
Such a move may see Tesco run out of stock of some of the nations favourite products such as Hellman’s Mayonnaise and Marmite, but will shoppers see this as a supermarket looking out for them and will this translate to a footfall increase. Will shoppers be happy to forego these brands and purchase Tesco’s own as part of the ‘stand against Unilever’. One analyst believes so as this morning reported by the BBC (http://www.bbc.co.uk/news/live/business-37576897), Theresa Wickham, a retail analyst and a former director at Safeway supermarket, said:
“These negotiations go on the whole time, people are trying to put the price up or they’re trying to do something else but they’re usually done behind the scenes. Now it’s become public, Tesco’s has a real opportunity to say that it is the consumer champion. But I think that Unilever will be talking to other retailers as well. But normally all these discussions are conducted behind the scenes and this one I’d term a real battle of the giants.”
It all depends on how Tesco’s spin the story but there is potential for massively positive media coverage – which lets face it, the big supermarkets (especially Tesco) need with discounters continually eating into market share.
The relationship between Unilever and Tescos is a big one, no doubt about it, and one that other supermarkets may use as a precedent as other suppliers increase prices due to the falling pound, so watch this space, this could just be first shot in the food wars.
Is Tesco’s a buy at its current share price? Next week I’ll be conducting analysis into whether now is the perfect time to buy Tesco as its recovers from the accounting scandal and dividend cut