Don’t make shoppers pay for weak pound, Tesco boss warns food companies

Dave Lewis spoke out for the first time since supplier Unilever tried to raise the cost of popular items such as Marmite due to a weaker currency

Tesco took brands such as Marmite and PG Tips off its shelves after Unilever tried to raise prices by 10 per cent (Reuters)

Dave Lewis, the chief executive of Tesco, has warned its international suppliers against using the plummeting pound as an excuse for illegitimate prices increases.

Last month, Tesco took brands such as Marmite, Ben & Jerry’s and PG Tips off its shelves after consumer goods giant Unilever raised their prices by 10 per cent to compensate for the weaker pound. The dispute was resolved after Unilever abandoned its plans.

Speaking publically for the first time since the row, Mr Lewis, who worked for Unilever for nearly 30 years until becoming Tesco chief executive two years ago, argued customers should not be asked to pay “inflated prices” due to fluctuations in currencies, such as the slump in the value of the pound following UK’s vote to Leave the EU.

Mr Lewis said: “I spent 28 years working in a multinational and there are always elements of currency volatility in businesses like that.”

“When there is devaluation, what multinationals do is they present sales at constant and current exchange rates and the City understands.”

“The only thing we would ask is that companies in that position don't ask UK customers to pay inflated prices in order that their reporting currency is maintained. They don’t do that to countries outside of the UK.”

Dave Lewis: ‘The only thing we would ask is that companies in that position don't ask UK customers to pay inflated price’ (PA)

The pound has fallen by around 16 per cent against the US dollar since Britain voted to leave the European Union in June. This already means that any goods brought in from outside the UK will be more expensive.

John Allan, Tesco’s chairman, previously warned customers to brace themselves for prices rises as Britain negotiates its way out of the EU.

“We are trying to defend our customers from unjustified price increases but that it is likely there will be some price increases going forward, I think is very likely,” Allan said last month.

The British Retail Consortium (BRC) warned that without reaching the right agreement with the EU by 2019, the UK could be forced to use World Trade Organisations (WTO) rules.

Under WTO rules, tariffs on food and clothing could rise sharply, with meat increasing by 27 per cent and clothing and footwear up to 16 per cent. Meanwhile, Chilean wine could be 14 per cent more expensive for importers.

Official data released earlier this week showed that the UK’s inflation rate came in lower than forecast.

However, analysts widely expect inflation to edge towards the Bank of England’s two per cent target over the coming 12 months as a result of the weaker pound.

Tom Stevenson, investment director at Fidelity International, said: prices are still rising faster than at any time since late 2014. The rise in prices continue to be driven by sterling’s recent weakness which has raised the cost of imported fuel and food.