The annual talks between food retailers and brand manufacturers are escalating: Essity has decided to halt deliveries to German market leader Edeka, because the latter will not accept the requested price increases.
Legal action
Essity, known as the producer of brands such as Tempo, Edet, Lotus, Okay or Demak’Up, is taking up arms against Germany’s largest supermarket chain. The producer is faced with significantly higher costs for raw materials, energy and transport and therefore wants to raise its prices. However, Edeka is not willing to accept this, and the talks are now in deadlock. That is why Essity has now decided to stop supplying the market leader until an agreement is reached. CEO Andreas Pier is determined, says German magazine Lebensmittel Zeitung. Edeka, for its part, is threatening legal action.
The news is remarkable, because in similar conflicts it is usually the supermarket chain that stops orders with the manufacturer, as a means of pressure. But Essity is a strong market leader, especially in the toilet paper category. This is a highly consolidated sector: there are few other manufacturers to whom the retailer can turn, and they all face the same cost increases. So this time, it is the manufacturer who is in a strong negotiating position.
The annual negotiations between the large brand manufacturers and the supermarket chains are proving difficult throughout Europe. This has already led to open conflicts elsewhere: in Belgium, market leader Colruyt Group took Ferrero and Mondelez products off the shelves; in Germany, Edeka did the same with products by PepsiCo and L’Oréal, among others.
