Nestlé and Ferrero tipped to follow Unilever’s suit in Tesco price row, says Euromonitor

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Euromonitor’s senior packaged food analyst, Pinar Hosafci, reckons other CPG manufacturers could take a leaf out of Unilever’s book and increase their prices as a result of the pound falling against the euro since the Brexit result.

Hosafci said: “This is not the first time Tesco is pressuring suppliers to drop prices. Since March 2015, the leading UK grocery retailer has been squeezing the biggest food brands in the world by its price wars, removing Kingsmill and Rachel Organics from its stores.

“However, this time around the move has been initiated by Unilever and across its entire portfolio of its products. Brexit has been a trigger that started this and it is likely that other companies, which are reporting in Euros including the likes of Nestlé and Ferrero will follow suit.

“This move could be more detrimental to Tesco than Unilever, which owns a number of power brand that are either leading or at best ranking in the second place in their respective categories. According to Eurominitor’s latest data, the company has 37% share in ice cream, 21% share in table sauces and owns the single largest yeast based brand – Marmite – with an impressive 85%. It is a company that Tesco cannot afford to ignore. I also believe that this is likely to be short term phenomenon. In the long run, UK’s leading retailer and one of the leading food manufacturer are likely to negotiate a deal that will bring them together. Otherwise, Tesco might risk of shedding further market share.”

However, Euromonitor added that it was important packaged food manufacturers to consider retail consolidation too. “Presence in the largest retailers is essential, as they can represent a significant proportion of revenue sales. This gives retailers an edge with regard to issues such as product pricing and brand visibility within stores,” the research company said. “In more fragmented markets, this power dissipates and, to an extent, this appears to be reflected in brand performance.”

Top 10 companies in the UK packaged food market

Company Shares (Global – Historical Owner) | Historical | Retail Value RSP | % breakdown
Geographies Categories Companies 2015 2016
United Kingdom Packaged Food Mondelez International Inc 4.90 5.00
United Kingdom Packaged Food Mars Inc 3.80 3.80
United Kingdom Packaged Food PepsiCo Inc 2.60 2.70
United Kingdom Packaged Food Unilever Group 2.50 2.50
United Kingdom Packaged Food Premier Foods Plc 2.30 2.20
United Kingdom Packaged Food Nestlé SA 2.20 2.20
United Kingdom Packaged Food Kraft Heinz Co 1.70 1.60
United Kingdom Packaged Food Kellogg Co 1.50 1.50
United Kingdom Packaged Food Yildiz Holding AS 1.40 1.50
United Kingdom Packaged Food Danone, Groupe 1.30 1.40
© Euromonitor International