Kraft Heinz withdraws products from UK retailer Tesco in price line

Bottles of Heinz Tomato Ketchup, owned by the Kraft Heinz Company, are for sale in Queens, New York, U.S., November 16, 2021. REUTERS/Andrew Kelly

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  • Tesco says it won’t pass on ‘unjustifiable price increases’
  • Kraft Heinz says confident of ‘positive resolution’
  • Row highlights tension over who bears the pain of inflation
  • Echoes 2016 ‘Marmitegate’ spat with Unilever

LONDON, June 29 (Reuters) – U.S. grocery giant Kraft Heinz (KHC.O) has stopped supplying some products to Britain’s biggest supermarket group Tesco (TSCO.L), which has resisted charging higher prices raised to its customers at a time of soaring inflation.

Tesco, which has a share of more than 27% of the UK grocery market, has apologized for the absence of popular Kraft Heinz products, such as baked beans and tomato ketchup, from its shelves, but said: “We will not pass on unjustifiable price increases to our customers. .”

Kraft Heinz said it struggled to provide good value products in a market hit by rising raw material and production costs.

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Tesco said its customers had plenty of branded and own-label alternatives to choose from and hoped the issue would soon be resolved.

A spokesperson for Kraft Heinz said it was working closely with Tesco to resolve the situation as quickly as possible.

“We are confident of a positive resolution,” they said.

The spat highlights the question of whether manufacturers, retailers or consumers should bear the pain of soaring cost inflation the most. Read more

Tensions have built up across the system, with Tesco the UK retailer big enough to fend off demands from Kraft Heinz and Kraft Heinz one of the only suppliers strong enough to hold their own.

European retailers are locked in protracted price negotiations with giant food companies that have announced plans to raise prices to limit the impact of soaring raw material costs, Reuters reported in February. Read more

Britain’s No.2 supermarket group Sainsbury’s (SBRY.L) said it was still selling a full range of Kraft Heinz products.

In a similar row in 2016 dubbed “Marmitegate”, Tesco removed dozens of Unilever products (ULVR.L), including popular yeast spread, from its website after a fall in the pound sterling, partly triggered by the Brexit, exacerbated tensions between suppliers and retailers.

Kraft Heinz said that with rising commodity and production costs, it was looking for ways to provide value to customers “through price, size and packaging” without compromising quality. Read more

SOAR PRICES

Prices are rising after the war in Ukraine, which restricted supplies of sunflower oil and drove up wheat and feed prices, driving up the cost of meat, dairy and baked goods . Soaring energy and fuel prices, as well as rising labor and transportation costs, have added to the situation.

Tesco said with household budgets under increasing pressure, it had a responsibility to ensure customers get the best possible value.

In the UK, wages are struggling to keep pace with inflation which hit an over 40 year high of 9.1% in May and is heading towards double digits. Some forecasters expect food inflation to hit 15% this summer and 20% early next year.

Earlier this year, the Albert Heijn chain of Ahold Delhaize – the largest Dutch supermarket – pulled Nestlé products (NESN.S), including Maggi, KitKat and Nescafé from its stores because Nestlé raised prices.

This month, French food giant and the world’s biggest yogurt maker Danone (DANO.PA) said it was reducing the variety of its products as soaring prices forced it to rethink the way which he sells his products. Read more

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Reporting by James Davey and Kate Holton, editing by Kylie MacLellan and David Gregorio

Our standards: The Thomson Reuters Trust Principles.

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