By Saabira Chaudhuri 

LONDON -- A big food fight that broke out suddenly in corporate Britain Wednesday ended just as abruptly about 24 hours later.

Tesco PLC, Britain's largest grocery chain, late Wednesday had removed from its online shopping site products made by Unilever PLC, another British-based multinational, because the consumer-goods maker insisted on higher prices. Unilever confirmed early Thursday it was charging all its retail customers more because of the pound's substantial fall since Britain's June 23 Brexit vote.

Then in separate statements late Thursday, both companies said they had resolved the spat, without giving details.

According to people familiar with the matter, Unilever was insisting on a 10% price rise across its range of products from its customers, including Tesco. Whether it got all or part of that remains a mystery for now. Analysts and industry insiders expect that Unilever got at least some of what it was asking for, given the magnitude of the pound's fall. Tesco and Unilever representatives declined to comment further.

The standoff, while brief, was an unusually public fight for Britain's typically button-down corporate world. It pitted two of the country's biggest business titans -- and two of the world's biggest companies, for that matter -- against each other in a duel that was splashed across British papers on Thursday. The feud was trending on social media as #marmitegate, named for the dark, salty spread that has a cult following here and is made by Unilever. (Unilever also makes Hellmann's mayonnaise, Dove soap and Ben & Jerry's ice cream.)

Not only does Tesco dominate the British grocery sector, it is one of the world's biggest retailers. Unilever, meanwhile, is the world's second-largest consumer-goods maker, behind Procter & Gamble Co. The Anglo-Dutch company occupies Unilever House, its imposing neoclassic headquarters along the River Thames in central London.

There is always considerable brinkmanship in negotiations between suppliers and retailers -- few places more so than in Britain's ultracompetitive grocery business. Price wars in recent years have pitted Tesco against a handful of smaller, national chains as well as upstart deep-discount chains that have flourished since the global economic downturn. The Unilever-Tesco standoff, analysts say, could set the tone for how any future prices rises in the U.K. are passed along across the rest of the industry.

"This isn't about Tesco or Unilever but about all U.K. retailers and suppliers," said Bernstein analyst Bruno Monteyne.

Unilever, however, has picked a tough sparring partner in Tesco Chief Executive Dave Lewis. He recently told reporters in London that suppliers haven't historically cut prices when input costs decline and he wasn't convinced they should be allowed to raise them now.

He should know. Mr. Lewis once headed Unilever's personal-care division and has spent years on the other side of the table in such negotiations. He was widely seen as a possible successor to Unilever CEO Paul Polman before he left for Tesco.

Mr. Lewis has previously dug in his heels in negotiations with suppliers. Last year, Tesco removed Carlsberg products from most of its stores as part of a product range review. It also temporarily took Schweppes brands off shelves, after a falling out with owner Coca-Cola European Partners, which licenses Schweppes in the U.K. and wanted to raise prices.

Despite all the talk about Brexit, analysts have questioned Unilever's timing on the price increase. It is boosting prices at a time when it is suffering falling sales volume. Marmite, many have pointed out Thursday, wouldn't appear to contain any foreign ingredients. That raises questions about why Unilever would need to raise prices on the product so steeply.

Unilever Chief Financial Officer Graeme Pitkethly told investors that pricing decisions are delegated to local markets. The U.K. makes up about 5% of Unilever sales.

On Tesco's side, Mr. Lewis's refusal to raise prices has been interpreted by some industry insiders as a smart way to burnish Tesco's reputation. The company has suffered in the public eye in recent years after it increased profit margins during the global financial crisis. More recently, it delivered a number of profit warnings and disclosed an accounting scandal. Under Mr. Lewis, it has attempted to get back to basics, creating a line of lower-priced products and painting itself as a company dedicated to ordinary Britons.

Write to Saabira Chaudhuri at saabira.chaudhuri@wsj.com

 

(END) Dow Jones Newswires

October 13, 2016 14:33 ET (18:33 GMT)

Copyright (c) 2016 Dow Jones & Company, Inc.
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