Magazine article Marketing

Nestle Forces a Co-Op Fallback

Magazine article Marketing

Nestle Forces a Co-Op Fallback

Article excerpt

The growing tensions between food retailers and manufacturers over pricing have been fuelled further this week as it emerges that the Co-op has been forced by Nestle to retreat on a Christmas promotion strategy.

The retailer was planning to sell top coffee brand Nescafe as a "loss-leader" in the run-up to Christmas as part of a very aggressive pricing tactic across a range of lines. But pressure from Nestle has forced the Co-op to lift its "below-cost" price of |pounds~1.19 for a 100g jar of Nescafe to the agreed |pounds~1.29.

Nestle had threatened to withdraw its promotional funds, described by a Co-op spokesman as being "very substantial", which are pooled with other brand manufacturer money to help the Co-op fund point-of-sale promotions.

The Co-op also claims it was concerned by the fact that Nestle had the legal right to withdraw all its supplies of Nescafe under the circumstances. "That would have been something which we couldn't afford to let happen," says a Co-op spokesman. "It is an extremely important brand and we need to have it there on the shelves."

But despite the humiliating climbdown, the Co-op is making no guarantees that it won't try the tactic again at some point in the future -- even with the same brand. …

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