Nestle in talks to end supermarket row as pricing pressures build

LONDON/ZURICH: Nestle is in talks to end a pricing stand-off with several European supermarkets, including Belgium’s Colruyt and Switzerland’s Coop, which have dropped some of the Swiss group’s products in the latest sign of growing pressures on the retail industry. Nestle, the world’s biggest packaged food maker, is facing off with AgeCore, a Geneva-based group representing six European retailers, which is seeking better supply terms. Nestle, which just reported its weakest annual sales growth in at least two decades, is under heavy shareholder pressure to boost sales and profit margins. Swiss chain Coop said it had stopped orders on more than 150 Nestle products, including Cailler Perle chocolate, Nescafe Azera coffee and pizza brand Buitoni La Fina, demanding better supply conditions.
Nestle said on Wednesday it regretted consumers could not currently access its products in some stores in Europe. It said it continued to negotiate in good faith and hoped to find an amicable solution soon. The spat is the latest sign of tension between retailers and suppliers.
Manufacturers like Nestle, Unilever and Procter & Gamble are grappling with changing consumer tastes towards healthier food and independent brands. They try to offset that by selling more higher-priced items, but the retailers are reluctant to put up prices as they face their own battle with changing shopping habits and online players like
Nestle is also under pressure from activist shareholder Daniel Loeb, whose hedge fund Third Point took a $3.5 billion stake last year and has pushed for higher margins, something Nestle has also embraced.
“They need to drive the margin, they’ve been very clear about that,” said Liberum analyst Robert Waldschmidt. “This is a line in the sand and they’re going to stand their ground a bit more on price. These retailers are calling them out on it and testing them.” — Reuters