The spectacular stand-off between Unilever and Tesco over the former’s desire to raise wholesale prices by about ten per cent can be seen as another arm wrestle between brands and supermarkets – albeit on an epic scale.
It’s made more interesting because Tesco CEO Dave Lewis formerly ran Unilever’s huge Personal Care division so we have a fight between “Drastic Dave” and “Pugilistic” Paul Polman, Unilever’s CEO.
But, for Unilever anyway, there’s rather more at stake.
Unilever has been raising prices across the world to try to counter the effects of a slowing global economy, reporting third quarter sales growth today of three per cent, down from nearly five per cent in the first half of the year. So you can see the pressure it’s under. But does the fall in the flagging GBP – down about 16 per cent since the Brexit vote – really merit such a sweeping across-the-board price rise in the UK? Unilever makes many of the products it sells in the UK here, after all. As Tesco’s Lewis well knows.
No doubt there’ll be a resolution but at the moment Tesco seems to have the upper hand, in the public’s eyes anyway.
Which is a problem for Unilever. Under Polman (left) Unilever has been energetically presenting itself as a good citizen; making sustainability the heart of its overall marketing to try to show consumers it’s on their side. This has been going on for years and has cost billions, mostly spent to good effect.
But now there’s a danger, in the UK at least, that such efforts may backfire. Unilever may be seen as just another huge company more concerned about its profits (and attendant bonuses) than hard-pressed consumers. Some people will say the good citizen mask has slipped.
At the very least Unilever needs to front up and make its case publicly which, so far, it has failed to do. In the meantime we wait to see how the other big supermarkets respond.