Tesco will delist suppliers if prices rise unnecessarily

21-Nov-2016 - Last updated on 23-Nov-2016 at 12:58 GMT

Tesco will delist manufacturer's products if they raise prices unnecessarily

Tesco’s chief executive has warned its food and drink suppliers that the supermarket will delist their products if they try to raise prices “without a justified reason”.

Dave Lewis urged multinationals – including Marmite owner, Unilever – not to use currency fluctuations as a reason for price hikes. He said customers shouldn’t have to pay “inflated prices” when it’s standard practice for firms to deliver financial updates in “constant and current exchange rates” anyway.

“I spent 28 years working in a multinational and there are always elements of currency volatility in businesses like that,” said Lewis. “When there is devaluation, what multinationals do is they present sales at constant and current exchange rates and the City understands.”

Tesco removed Unilever products

Speaking publicly for the first time since Tesco removed Unilever products from its website temporarily in October, after the manufacturer raised its prices by 10%, Lewis said manufacturers don’t raise prices in other countries when currencies change.

“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,” said Lewis, who joined Tesco from Unilever two years ago.

While Lewis admitted it was multinationals’ “right to try to increase prices”, he said it was “Tesco’s right to say we will no longer stock them if they do without a justified reason”.

Tesco will work with manufacturers

Tesco will work with manufacturers to offset as much added costs as possible, Lewis said.

Since Tesco’s row with Unilever over prices, a series of food manufacturers have blamed price rises on currency fluctuations. Nestlé said it might have to raise prices due to deflation on October 21, after cutting its annual growth forecast by 0.8%. Crisp maker Walkers increased prices by 10% on November 7, at the same time as Birds Eye hiked its prices by 12%.

Meanwhile, Tesco’s sales rose by 2.2% in the 12 weeks to November 6, according to Kantar Worldpanel. The supermarket has continued to regain market share since its accounting scandal in 2014, as its share rose to 28.2% from 27.9% in the same period last year.