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Unilever not powerful enough for Coles & Woolworths

A report in Fairfax Media’s (ASX: FXJ) Sydney Morning Herald suggests that the pressure placed on suppliers by supermarket chains Coles, owned by Wesfarmers (ASX: WES), and Woolworths (ASX: WOW) is even affecting the Netherlands-based global giant Unilever (AMS: UNIA).

Unilever owns over 1,000 household consumer brands including Lipton and Bushells tea, Pears and Lux soap, Streets ice cream and Lynx deodorant.

While Coca-Cola Amatil (ASX: CCL) CEO Mr Terry Davis has previously spoken out regarding the conduct of the supermarkets towards suppliers and their margins, until now it has generally been smaller food and beverage producers such as Freedom Foods (ASX: FNP) that have been considered more exposed to these pressures.

The latest accounts lodged by Unilever show revenue has stalled and profits fell in 2012; however, 2011 profit was reportedly inflated by assets sales. The stalled revenue line suggests that either the supermarkets’ own private label products have been growing at the expense of Unilever’s branded products or that Unilever has been forced to give up margin and sell more volume just to hold revenues constant. Most likely it is some combination of the two.

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Motley Fool contributor Tim McArthur does not own shares in any of the companies mentioned in this article.

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