An article published on February 11, 2009 in Wall Street Journal reported that a grocery chain has removed from its Belgian stores about 300 Unilever products that it says are priced too high, a sign of mounting tension between retailers and suppliers as the recession grinds on.
The stare-down shows how fraught relations between retailers and their suppliers are becoming amid the severe slump in consumer spending. Grocery stores across the globe are putting growing pressure on food and drink companies to lower prices or to offer other more favorable terms.
The move by Brussels-based Delhaize SA, which operates the Food Lion chain and other grocery stores in the U.S., comes just days after Unilever reported strong fourth-quarter profit that was driven in large part by its ability to command big price increases despite the ailing economy.
Delhaize says its conflict with Unilever is rooted in the supplier's effort to push a broad range of goods into its stores, including some that the grocer says it would prefer not to stock because they are unpopular. If the supermarket doesn't buy the whole range of products, Delhaize says, Unilever has threatened to raise prices by an average of 30% for the remaining items.
"They want to impose their product assortment on us," says Lisbeth Rogiers, a spokeswoman for Delhaize, which operates more than 2,500 stores in five countries, including more than 1,500 in the U.S. "That is unacceptable for our customers, and we always put our customers at the center of our decisions."
Unilever wants Delhaize to promise it won't stop selling Unilever products without consulting the company first, Unilever spokeswoman Aurélie Gerth says. The Anglo-Dutch consumer-goods giant wants to increase prices for Delhaize by an average 2.5%, she adds.
Deborah Weinswig, an analyst for Citi Investment Research, believes Wal-Mart's plans to freshen up its Great Value brand will trigger more price cutting on the national brands sold at Wal-Mart. And if Wal-Mart reduces its national-brand prices, "I think the food retailers will have to follow or they will be at risk of losing market share," she says.
In January 2009, mid-Atlantic grocer Weis Markets, which operates 155 stores, lowered or froze prices on 2,400 targeted staple items. Similarly,Terry Leahy, the chief executive of British retailer Tesco PLC, urged suppliers to pass on to stores the recent drops in commodity and oil prices.
Source: Rohwedder, Cecilie and Patrick, Aaron O. and Marting, Timothy, “Big Grocer Pulls Unilever Items Over Pricing” Wall Street Journal, February 11, 2009.