Tesco Boss Warns Suppliers it Won’t Tolerate Illegitimate Price Increases
18 Nov 2016 --- Tesco chief executive Dave Lewis has publicly hit out at suppliers who use the fall in value of sterling to ratchet up price increases, saying price rises had to be “legitimate” and that the UK’s biggest supermarket had the right to stop selling products if it thought it was being duped.
The comments from Lewis, who previously worked at Unilever for 28 years, follows the high-profile public spat between Tesco and Unilever after the Anglo-Dutch company tried to pass on a 10 percent cost increase on some of its products onto Tesco.
“I spent 28 years working in a multinational and there are always elements of currency volatility in businesses like that,” said Lewis, according to the Guardian newspaper.
“When there is devaluation, what multinationals do is they present sales at constant and current exchange rates and the City understands.”
“The only thing we would ask is that companies in that position don't ask UK customers to pay inflated prices in order that their reporting currency is maintained. They don't do that to countries outside of the UK.”
“Where a cost is real and justified, we will sit down and discuss how we can offset it.”
“We buy virtually everything for our own label so there isn’t an ingredient or a commodity out there that we don’t have very good insight into.”
Lewis later said that Tesco had the “right to say we will no longer stock them if they do [increase prices] without a justified reason.”
The fact that Lewis made this declaration in public would suggest he fears more suppliers will try similar tactics to Unilever, in the wake of the fall in the value of sterling which has fallen by around 16 percent against the US dollar and 14 percent against the Euro since Britain voted to exit the European Union in June.
The spat between Tesco and Unilever was prompted by the Marmite maker saying a price hike was necessary to cover higher import costs.
However, in the face of consumer fury and a growing PR disaster, Unilever backtracked and announced a new supply deal with Britain's biggest supermarket.
Earlier this month, Birds Eye fish fingers and PepsiCo-owned Walkers crisps asked supermarkets for price rises of up to 12 percent, indicating that price battles between retailers and brands could be widespread following the plunge in the value of the pound.
