The battle beyond borders: Tesco versus Unilever

Since the rapid rise of TNCs (Transnational Corporations also known as Multinationals) in the 20th century,  corporate giants such as Walmart, Pfizer,  Apple and so on have come to dominate our global economy (think of Wall Street) and our global markets for manufactured goods and services (think of Amazon, Tata Steel etc.). These TNCs are so enormous that their decisions can have national and even global impacts. If Toyota decides to relocate its production line to a cheaper country for example, it can spell doom not just for the town or city it leaves behind, but can have a major impact on the GDP (Gross Domestic Product i.e. how much money a country produces) of the host region. As we saw from the 2008 financial crisis, our world economy has been as much shaped by the rise and fall, negotiations and changes within and between corporations as it has from the trade deals and political negotiations between nations. Given that the largest of these TNCs  generate an income greater than the GDP of entire countries it is perhaps no surprise that they hold so much sway in the international arena. Conversely insignificant political decisions and even speeches, however seemingly unconnected to financial matters, can also have a direct and immediate impact on currency and trade – as we are witnessing on an almost daily basis since Britain’s vote to leave the EU and the dramatic drop in the value of pounds sterling.

And it is the drop in the value of the pound that has brought a new battle to the foreground. This time the UK is watching, almost powerless, as two of the UK’s largest and most influential TNCs, Tesco and Unilever, are embroiled in a bitter battle over wholesale prices . As the pound’s value drops, it becomes more expensive to import goods (you simply cannot buy as much with £1 as you used to be able to a few months ago). Unilever claim that this justifies them increasing their wholesale charge to their main client Tesco but the reality is that this drop in the pound is temporary and neither Tesco nor Unilever are anything like as vulnerable to currency fluctuations as they claim for they are insured against such changes (at least short-term). An additional and critical factor in the debate is the challenge of competition. Tesco, while still the UK’s biggest retailer, is perpetually engaged in a price war with its rivals such as Asda, Sainsburys, Aldi etc. to keep its customers shopping in its stores. If they increase their product prices ahead of their rivals they risk losing customers who have increasing purchasing choice. Such a loss would far outweigh any increases in income from raised prices in-store.

Perhaps what is most fascinating for the geographer observing this fracas is how this argument and its conclusion could have ramifications on a national and global scale on shop prices and profit margins, jobs and incomes and ultimately our monthly grocery bill. For a global community that values democracy so highly, it is a wonder that we don’t spend more time scrutinising the CEOs and board of directors of these giant business empires as they seem to be more powerful than our own government at times.

For the latest on Tesco V Unilever, follow this link: Battle for Ben & Jerry’s

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