Metro dumps Kellogg over price hike

By Charlotte Eyre

- Last updated on GMT

Related tags Kellogg Supermarket

Germany-based retailer Metro has taken Kellogg's products off
its shelves after the cereal company attempted to pass on
higher commodity costs through price hikes.

Like many other food companies, Kellogg is battling to keep maintain margins as the cost of commodities, particularly sugar and wheat, continue to rise, and despite companies claiming that some costs will have to be passed along the food supply chain, this strategy is clearly meeting with resistance from retailers.

Metro spokesman Martin Bruening told that the company had decided to stop buying Kellogg's products because the prices increases were "absolutely not justified".

"The Metro Group has negotiated with Kellogg's for several months," he said.

""In the course of this negotiation an agreement could not be reached, and so after the failure of the negotiations we have not purchased Kellogg's products since October 1."

Metro Group had sales of €56.4bn last year.

The group has supermarkets in 30 countries and a workforce of about 250,000.

Many countries in Europe and the US are now facing the dilemma of whether they should increase retail prices, or swallow the costs themselves.

Last month, UK supermarket Asda declared that it will swallow many of the costs, as it is still committed to keeping consumer prices low.

An Asda spokesperson corrected earlier media reports that there will be absolutely no consumer price hikes, pointing out that sometimes it would be unfair on the supermarket's suppliers.

Milk, for example, does not come with much added-value, so Asda would have to make its farmers take a hit.

Some may say that Asda's stance is a shrewd public relations move likely to be copied by other companies, however the tussle between Metro and Kellogg's demonstrates that not all food manufacturers have the same idea.

Premier Foods and Sara Lee have both said that the cost of their products will go up, as has Purac, which has increased the costs of ingredients like lactic acid for the third time this year.

In April, Hershey announced that the price of its chocolate bars was to go up four to five percent, promptingl senior vice president Christopher J Baldwin to explain that all companies have on major objective, and that is to retain a healthy financial position, "Our primary business objective is to win in the market place", he said.

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