While Tesco may not be worried by the prospect of a bigger P&G, says Verdict’s Gavin Rothwell, other suppliers and smaller retailers may have choked on their cereal when they heard the news last Friday.
“This will not create a seismic shift in the balance of power between manufacturers and retailers, but it will certainly give P&G more clout, and it could well trigger a further round of consolidation in the sector.”
Multinational retailers might appear to call all the shots, said BRC communications director David Southwell, but this doesn’t mean regulators should wave through deals like this just to redress the power balance.
“Brands still have enormous power. Look at Kimberly-Clark’s decision to stop supplies of Andrex to Sainsbury in 2003 after it refused to accept the price increase agreed with its other retail customers. They control brands that retailers have to stock. That gives them leverage.”