Rising costs for materials, production and transportation are hitting companies throughout every supply chain. Manufacturers caught in the middle are having to weigh whether they can win price increases from customers to help offset their higher costs.
Most small and midsize companies have little leverage in those negotiations, but what happens when both buyer and seller are market heavyweights?
That scenario has played out in the United Kingdom where the country's largest grocery chain, Tesco, allowed some shelves to go empty after rejecting price increases from major suppliers.
At the end of June, Kraft Heinz Co. stopped deliveries of some major products — ketchup, baked beans and tomato soup — after Tesco said the new prices were not reasonable.
"We will not pass on unjustifiable price increases to our customers," BBC news reported.
Mars Inc. also halted deliveries of Whiskas-brand cat food to Tesco shops when the grocer objected to rising prices for that product.
On July 8, Tesco and Kraft said they'd settled their dispute and that Kraft products would be returning to shelves, but neither company would say if prices will go up as part of the agreement.
Inflation in the U.K. is currently at 9.1 percent, its highest in more than 40 years.
The dispute doesn't directly involve packaging costs, although obviously it will impact suppliers to Kraft Heinz and Mars. It'll be interesting to see how the standoff plays out in the long term.
