Belgian supermarket freezes Unilever orders amid pricing dispute

Posted by Daniel Palmer on 11th February 2009

Belgium’s second-largest supermarket chain, Delhaize, has placed a halt on orders of around 300 Unilever products following a break-down in pricing negotiations.

The consumer goods giant, which reported sales growth of 7.4% last week despite flat volumes, supplies Delhaize with just under 500 different products in a wide range of categories and the failure to come to terms suggests tensions between retailers and manufacturers are on the rise. With supermarket chains keen to push their private label products and lower prices to attract cost-conscious consumers, the relationships between manufacturers and retailers are likely to be stretched in coming months.

Unilever spokeswoman Liesbeth Rogiers told Reuters on Tuesday that the two parties has failed to find a middle ground in their discussions but hoped a deal could be reached during the year. “We did not reach an agreement during our annual negotiations. The price of goods is a part of that agreement,” she said.

The Belgian supermarket chain reported in a statement yesterday that Unilever’s requests were “unprecedented”, admitting that the relationship with the supplier was “tense.” Delhaize suggested that Unilever was asking for price hikes of up to 30%, a figure disputed by the manufacturer – who has said the price increases are around 2.5% and have already been accepted by other Belgian supermarkets.

Both companies are blaming each other for the failure of negotiations, with Delhaize claiming they have never been “confronted with this attitude” and Unilever arguing that Delhaize are “being really tough on negotiations.” The breakdown has also been caused by disagreements on the in-store promotion of products.

How the dispute pans out will be intriguing, after all Unilever is one of the world’s largest supermarket suppliers. Their sales in Belgium will obviously be affected while the dispute simmers, but can Delhaize afford the likely backlash from customers expecting Unilever brands such as Dove, Lipton and Knorr soup to be offered at a major supermarket?