Supply chain · 21 October 2016

Nestlé hints at UK price rise to negate impact of weak pound

KitKat
Brands like KitKat could see price increases in UK supermarkets

The world’s largest food company Nestlé has admitted it may follow Marmite-maker Unilever by looking to increase the price of some of its popular products in the UK to offset the weak pound.

Nestlé, which produces household brands like KitKat, Nescafé coffee and Haagen-Dazs ice cream, warned of a price following disappointing 2016 sales figures.

Speaking at a press conference after the release of Nestlé’s latest sales figures, the Swiss firm’s chief executive Paul Bulcke said that Nestlé’s UK arm would make its own decisions, but that future price increases were likely.

Bulcke said: “They [the UK] are going to have to sort it out and do that responsibly. That means seeing all possible other actions to absorb the [devaluation].”

However, Bulcke added that a UK price hike may be limited by the fact many top selling Nestlé products are produced in Britain.

“I think KitKat is going to stay a very enjoyable great break, so I don’t see that turning differently,” he added.

Any suggestion of a rise in prices will likely spook supermarkets, as the announcement comes only a week after food supplier Unilever’s dispute with Tesco over a proposed 10 per cent price increase on certain popular items.

Several products, including Marmite and Ben & Jerry’s, briefly disappeared from Tesco’s online store. Unilever and Tesco eventually reached an agreement, although neither firm revealed whether their resolution will would result in Unilever products becoming more expensive.

The British Retail Consortium (BRC) has repeatedly warned that the fall in the pound’s value against the euro and the dollar since the Brexit vote is likely to push prices up, considering much of the nation’s food is imported from overseas.

Retail experts anticipate that other large distributors will follow Unilever’s lead and bump up prices if the pound remains persistently weak.

Analyst Nick Bubb told The Guardian newspaper: ““These things are inevitable given sterling weakness, and the supermarkets can’t expect suppliers to shoulder all the burden.”

Britain’s small suppliers were encouraged last week to take advantage of poor exchange rates and position themselves as supermarkets’ preferred UK-based suppliers.

Ian Cass, head of the Forum of Private Business (FPB) said following Unilever’s rift with Tesco: “For too long major retail outlets have squeezed small suppliers. The impact of that strategy is now starting to bite and we are calling on large retailers to open delivery doors to small UK producers again.

Meet the luxury hand-made biscuit brand is transforming the market for premium gifts

Sign up to our newsletter to get the latest from Business Advice.

TAGS:

ABOUT THE EXPERT

Fred Heritage is deputy editor at Business Advice. He has a BA in politics and international relations from the University of Kent and an MA in international conflict from Kings College London. He previously worked as a reporter at Global Trade Review magazine.

Q&A

If you’ve found the article above useful, but have a more detailed and bespoke question, then please feel free to submit a query to our expert. We at Business Advice will get in contact with them on your behalf and arrange for a personalised response. These questions and answers will then be collated on the site for any other readers who have similar queries.

Ask a question

On the up

Find out how KPMG Small Business Accounting can really work for you

FIND OUT MORE