Dispute between Unilever and wholesaler Musgrave over pricing

A war of words has broken out between Anglo-Dutch consumer goods giant Unilever and Cork-based wholesaler Musgrave over the pricing of many of its well-known brands.

In a statement on Friday night Unilever said there had been "no overall cost price increase on the portfolio of products sold" to retailers in Ireland.

It described comments on Thursday by SuperValu, which is operated by the Cork-based Musgrave wholesale group, as being “entirely inaccurate”.

However, a spokesman for Musgrave said its position on the pricing dispute remains unchanged. It is believed that Unilever stopped supplying goods to SuperValu and its sister retailer Centra on October 10th.

It is understood that Unilever operates a quarterly exchange rate mechanism, which is monitored monthly. The benchmark rate values €1 at 78.91p in sterling. The quarterly average exchange rate is calculated on a rolling three-month basis, and communicated to retailers at the end of each calendar month.

If the quarterly rate is 5 per cent higher or lower than the benchmark rate, Unilever commences a price review.

The value of sterling has slumped by about 20 per cent since the Brexit vote on June 24th was announced, prompting significant changes in the mechanism operated by Unilever.

The average rate for the June to August quarter of this year had €1 equalling 82.91p, which was 5.07 per cent above the benchmark rate, thereby triggering a possible decrease in price of 4.82 per cent. However, by using a spot rate of 87.36p, as at September 20th, rather than the average exchange rate, the actual decrease triggered was 9.67 per cent.

This was an average price and when weighted across the portfolio of products effectively negated Unilever’s average UK price cost increase of 10.6 per cent for retailers in the Republic.

Irish retailers

As a result it is understood that Unilever decided that there would be no cost price increases for Irish retailers.

However, Musgrave is believed to be disputing the justification for Unilever’s price increase in the first instance, and believes that the currency differential should be delivering lower prices to its consumers.

In its statement on Thursday Musgrave said that, due to its “refusal to accept what we consider to be an unjustified price increase, we may experience some supply issues on certain Unilever products”.

“We would stress that this is not our desired outcome, but we do not believe a price increase on the products under discussion is justified given the current exchange rate,” the retailer said. “In fact, we believe that a price decrease is warranted given the fall in the value of sterling against the euro.”

Earlier this week it emerged that Tesco in the UK was in dispute with Unilever over its proposed price increases and it stopped stocking certain brands on its website. The dispute was resolved on Thursday.

Unilever's brands include Marmite, Hellmann's mayonnaise, Knorr soups and sauces, Lyons tea and Flora spreads.