A noted retail expert has said that price increases are likely to be implemented in the UK's FMCG sector, once existing contracts with retailers are renewed, due to the fall of Sterling.
Commenting following the Tesco-Unilever stand off earlier this week, Heiner Evanschitzky, Professor of Marketing at Aston Business School, said, “Increases in price as a result of increased input costs due to the drop in the pound are inevitable.
"As ever, both manufacturers and retailers will pick up the cost. But then manufacturers enjoy a fatter margin than retailers and tend to have greater wriggle room when this kind of thing happens."
Evanschitzky added that he expects to see price increases "in the mid-term. Most firms will have hedged against currency fluctuations, so there shouldn’t be an immediate effect as the pound drops. But when existing contracts are renewed, wholesale prices will likely go up. If we believe in a 10% rise, as Unilever seems to be claiming, I’d expect retail prices to increase by between 2-5%, depending on the percentage of variable costs of the sales price.
"The big four retailers won’t be able to afford it otherwise."
© 2016 European Supermarket Magazine – your source for the latest retail news. Article by Stephen Wynne-Jones. To subscribe to ESM: The European Supermarket Magazine, click here.
