Wednesday, February 11, 2009

Big Grocer Pulls Unilever Items Over Pricing

The Wall Street Journal - A big grocery chain has removed from its Belgian stores about 300 Unilever products that it says are priced too high, a sign of mounting tension between retailers and suppliers as the recession grinds on.

The move by Brussels-based Delhaize SA, which operates the Food Lion chain and other grocery stores in the U.S., comes just days after Unilever reported strong fourth-quarter profit that was driven in large part by its ability to command big price increases despite the ailing economy.

The banished products include everything from Dove soap and Axe deodorant to a jam brand called Effi. Delhaize normally stocks as many as 500 Unilever products in its 775 stores in Belgium.

The stare-down shows how fraught relations between retailers and their suppliers are becoming amid the severe slump in consumer spending. Grocery stores across the globe are putting growing pressure on food and drink companies to lower prices or to offer other more favorable terms.

Faced with penny-pinching consumers and the growing strength of discount stores, retailers are desperate to cut prices, and a growing number are asking suppliers to help foot the bill.

Meanwhile, consumer-goods companies such as Unilever are struggling with a drop in demand from stores whose customers are trading down to cheaper private-label brands. Earlier this month, Kraft Foods Inc. lowered its earnings guidance for the year as retailers, including Wal-Mart Stores Inc., cut back orders.

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