Hovis Delisting Highlights Producer-Retailer Tensions, Strength Of Private Labels

A clash between UK-based supermarket operator Tesco and branded food producer Premier Foods is indicative of the current power struggle going on across Western Europe between retailers and producers, as both push for the other to stomach commodity price increases. The clash is in line with our core long-term views and has seen Tesco delist 11 products under the Hovis bread line after Premier Foods attempted to push through price increases. With BMI forecasting that agricultural commodity prices are likely to continue trending higher over the next year, this type of action is likely to become more common and the tension it causes a reason why we have suggested that the food sector may underperform a wider rally in equity prices.

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