The Tesco vs Heinz/Mars pricing spats jog memories of Marmitegate in 2016, whenUnilever had its fall-out with Tesco. Before that, Heineken, and Walkers/Pepsiin the noughties, also had a six-month stand-off over pricing with Tesco. Italways seems to be Tesco involved on the retail side and a huge, brandedsupplier on the other.
So why Tesco? Two reasons: firstly, Tesco has PR expertise. Having emerged fromthe Marmite argument with a glowing aura as the consumer’s guardian against thebig ‘profiteering’ brands, they are much faster now to take the initiative. OnMarmite, a reporter noticed the lines disappearing from Tesco online, did somedigging and exposed the row – whereas Tesco was out there with statementsimmediately on Heinz. Against big businesses like Heinz, it’s an open PR goalfor Tesco. The public sympathy, outside of Heinz factory workers of course,will go immediately with the retailer.
The second reason is that a retailer can only logically reject a cost priceincrease on the grounds that it’s not justified. Tesco has the best data, andby far the best understanding of how the supplier’s P&L breaks down by line.This gives Tesco the confidence to challenge the justification, and they arequite prepared to stick their necks out, especially as the argument doesn’teven need to be won by Tesco, just heard loud and clear by shoppers. Newseditorial is not only free, it’s more powerful than paid advertising. Theaverage shopper will never find out if Heinz tried to impose a 10% price riseacross the board like Unilever on Marmite, or in fact any detail if theresolution was a Tesco backdown. Watching the retail price move followingresolution doesn’t mean there wasn’t some back-door money involved either.
In sales terms, the supplier takes a much larger proportional hit, and alsoloses the PR battle. The dip in sales for Tesco will also have been eased bysome switching whilst shopper loyalty and reputation from the fight skyrockets.
An intelligent supplier price move, communicated correctly, against thebackdrop of today’s soaring inflation is so easy to justify that one has towonder how these disputes arise. On the supplier side, it always seems to be abig branded company – not just because they are big enough to make the news butfor two other reasons. First, they have the pockets, and therefore nerve, tohold out on a standoff and stop shipments. I admire this – smaller suppliersalso get challenged by Tesco but back down much earlier, even if their move wasjustifiable. But the second reason is some big brands have enough arrogance tobypass pricing intelligence and enforce a blunt or even blanket price move. Thejustification is then worth testing, so Tesco steps in.
Suppliers can avoid pricing problems by learning to do it right, and they willnever win a PR battle on prices rises – so it’s worth getting it right in thefirst place.