Closing post
With peace broken out in the Great Brexit price war (for the moment), it’s time to wrap up for the day.
Although ice cream and yeast spreads are trivial compared to, say Aleppo, today’s drama has brought home the consequences of the slump in the pound since June.
Here’s our latest news story:
Tesco and Unilever settle Marmite dispute
Unilever has resolved its dispute with Tesco and says well-known brands including Marmite and Ben & Jerry’s will be back on the shelves.
In a statement on Thursday afternoon, the food and household goods supplier said: “Unilever is pleased to confirm that the supply situation with Tesco in the UK and Ireland has now been successfully resolved.
“We have been working together closely to reach this resolution and ensure our much-loved brands are once again fully available. For all those that missed us, thanks for all the love.”
It emerged on Wednesday that Tesco was running low on a range of household brands from Marmite to Comfort fabric conditioner after a row with its major supplier.
Unilever halted deliveries to Tesco after the supermarket refused to stump up across-the-board price rises of about 10% for its brands.
A spokesperson for Tesco said: “We always put our customers first and we are pleased this has been resolved to our satisfaction.”
The statement appears to suggest the two sides reached a compromise, although neither Tesco nor Unilever would confirm any details of their talks.
The quick resolution of the row is good news for Tesco’s boss, Dave Lewis, who previously held a senior role at Unilever. Analysts said the public spat had worked out well for the supermarket, as tabloid newspapers widely portrayed Tesco as a people’s champion on low prices.
“When was the last time you saw articles about Tesco as the shoppers’ champion,” said Dave McCarthy, a food retail analyst at HSBC....
More here:
Thanks for reading and commenting. Goodnight! GW
Updated
Associated Press also found limited sympathy for Unilever, as it struggles to cope with the consequences of Brexit.
Here’s some of their latest report:
Philip Walker spreads Marmite on his daily crumpet and stockpiles jars of the yeast spread. He’s a fan, and he’s upset at plans to raise the price of this icon of the British breakfast table.
Love it or hate it, Marmite has become the most visible sign yet of Britain’s decision to leave the European Union after consumer giant Unilever sought to raise wholesale prices for its products by a reported 10% following a sharp drop in the pound.
Tesco, the U.K.’s biggest supermarket chain, has rejected the increase and removed many Unilever products from its website. #Marmitegate was not far behind.
“I am more angry at Unilever than I am at Tesco,” said Walker, a 43-year-old regional manager for St. John Ambulance. “It seems Unilever is using Brexit as an excuse to hold Tesco customers to ransom.”
Tesco and Unilever will be glad to put this public spat behind them. But consumers should still brace for price hikes in the months ahead.
A series of experts have warned today that the weak pound makes this inevitable, even though retailers will try to force suppliers to swallow the cost.
Laith Khalaf, senior analyst at financial services group Hargreaves Lansdown, summed it up:
‘This pricing spat is likely to be the thin end of the wedge when it comes to relationships between UK retailers and their suppliers, in light of the pressures now applied by weaker sterling.
This kind of friction is an inevitable result of the unstoppable force of higher import costs hitting the immovable object of UK retail pricing.
Peace may have broken out, but Unilever products still aren’t available on Tesco’s website tonight:
There were signs today that Unilever were losing the PR battle with Tesco -- even within the shadow of the Marmite factory.
Reuters caught up with Jeaninne Richards, 69, a retired dressmaker and Brexit support, in the aisles of the Basildon Tesco, and was told:
“Unilever is being so greedy. They are using Brexit as an excuse ... If they take their products off the shelves, people are going to buy different products and then stick with it, so they are going to lose a lot of customers because of it.”
City AM’s Jake Cordell suspects Unilever have caved in....
Tesco on #Marmite: "We’re pleased its been resolved to our satisfaction”. Big cave in from Unilever?
— Jake Cordell (@JakeCordell) October 13, 2016
Tesco: We're pleased the situation is resolved
A spokesperson for Tesco has told the Guardian that:
“We always put our customers first and we are pleased this has been resolved to our satisfaction”
They won’t tell us how the situation has been resolved with Unilever.
Our retail expert Sarah Butler suspects that the two sides have cut a deal.....
Tesco says its dispute with Unilever has "been resolved to our satisfaction" - appears to suggest some compromise deal has been reached..
— Sarah Butler (@whatbutlersaw) October 13, 2016
Updated
Some snap reaction to the peace deal between Tesco and Unilever:
So #Tesco and #Unilever have made up. But where did they settle on price. Unilever wanted 10% price hike. What did they get!!!???
— Beth Rigby (@BethRigby) October 13, 2016
Oh thank God, the Great Marmite Disaster of 2016 'has been resolved' 🙌🏼
— Beth Reekles (@Reekles) October 13, 2016
This tesco / unilever deal is great news for customers. But less good for producers of gags on news programmes
— Imogen Walford (@imogenaowalford) October 13, 2016
#Marmite #Brexit #Marmageddon #MattCartoon pic.twitter.com/ZXdJJxJjkG
— The Telegraph (@Telegraph) October 13, 2016
The Great Marmite price war will go down as one of the shortest battles in UK business history.
It’s just 24 hours since the news broke that Tesco had pulled Unilever products from its website, after refusing to accept a 10% price hike to cover the slump in the pound.
Since then, the issue has been on the front page of websites and newspapers, and trending on social media with taglines like #MarmiteGate and #Marmageddon.
British people panic buying #Marmite perfectly sums up the hysterical insanity of 2016. #Marmitegate #Brexit pic.twitter.com/Yt0DS4TkLY
— Tom King (@tallgeekychap) October 13, 2016
The dispute didn’t impress investors in either company -- Tesco’s shares slid by 3%, while Unilever saw 3.4% lopped off its value today. Clearly both sides risked losing out unless they came to a quick resolution.
Unilever: We've resolved the Tesco dispute
NEWSFLASH: The Brexit price wars are over.
Unilever just issued a statement saying that the dispute with Tesco has been “successfully” resolved.
The Anglo-Dutch group says:
Unilever is pleased to confirm that the supply situation with Tesco in the UK and Ireland has now been successfully resolved. We have been working together closely to reach this resolution and ensure our much-loved brands are once again fully available.
For all those that missed us, thanks for all the love.
MARMITE-GATE IS OVER
— Emily Purser (@EmilyPurser) October 13, 2016
Unilever pleased to confirm the supply situation with Tesco in the UK and Ireland has now been successfully resolved.
However, we don’t (yet) know whether Unilever has abandoned its attempt to hike prices, or whether Tesco has agreed to the price increases, or whether the two sides have met in the middle.
Donald Tusk’s warning that Britain can’t have a soft Brexit could worry UK firms.
Trade insurance group Euler Hermes has warned that more companies would be driven under by a hard Brexit than a more conciliatory divorce.
But either way, the prospects aren’t great.
The FT has the details:
A hard Brexit — a complete break with no access to the single market — would increase the risk of more bankruptcies, it says.
Under a soft Brexit it predicts that 25,170 businesses will fail in 2019. Under a hard Brexit that rises to 26,570.
New forecasts show that a hard Brexit would put 1,400 more UK companies into insolvency than a soft Brexit https://t.co/MLxHghjUjH
— Financial Times (@FT) October 13, 2016
Tusk: It's Hard Brexit or no Brexit
NEWSFLASH: Donald Tusk, president of the European Council, is dismissing the idea that Britain could secure a so-called soft Brexit.
Speaking in Brussels, Tusk argues that Britain cannot expect to retain many of the benefits of EU membership while also leaving the bloc.
Instead, he hinted that the prospect of a hard Brexit might force the UK to rethink leaving at all.
Tusk says:
“It is useless to speculate about ‘soft Brexit.
These would be purely theoretical speculations. In my opinion, the only real alternative to a ‘hard Brexit’ is ‘no Brexit’. Even if today hardly anyone believes in such a possibility.”
Some UK ministers has argued that terms like ‘hard Brexit’ have little meaning, and that they could carve out a good deal that gave Britain access to the single market while also restricting migration.
The only real alternative to a "hard Brexit" is "no Brexit". Even if today hardly anyone believes in such a possibility. pic.twitter.com/iFRfHUIO4w
— Donald Tusk (@eucopresident) October 13, 2016
The essence of Brexit as defined in the UK referendum campaign means radically loosening relations with the EU, a de facto "hard Brexit"
— Donald Tusk (@eucopresident) October 13, 2016
Tusk also seemed to rubbish the idea (popular with foreign secretary Boris Johnson) that Britain could have its Brexit cake and eat it.
#Tusk:"#Brexit will be a loss for all of us. There will be no cake on the table, only salt and vinegar" #EPC20
— Marco Incerti (@MarcoInBxl) October 13, 2016
Hopefully there’ll be Marmite on the table too....
Shares in Tesco and Unilever have both fallen today, as investors anticipated the Marmite price wars turning uglier.
Tesco’s shares fell 3% to 196p, while Unilever shed 3.4% to £36.51.
European stock markets suffer a bad day
It’s been a ropey day in the financial markets, as investors have fretted about the global economy.
All the main European stock markets ended in the red, with the FTSE 100 dropping 46 points to 6977. Mining stocks were the big losers.
The City was depressed by the overnight news that Chinese exports shrank by 10% year-on-year in September.
Shares are also falling on Wall Street, where traders are also wondering whether the Federal Reserve should really raise interest rates soon.
Chris Beauchamp, Chief Market Analyst at IG, says:
Wall Street has joined in the general flight from risk this afternoon, with the overnight Chinese export data still the chief culprit (although in fairness Bob Dylan being awarded a Nobel Prize would probably make anyone lose their faith in the future).
There not much support for Unilever in the English town where Marmite is produced.
Nazia Parveen, our North of England correspondent, has paid a flying visit to Burton upon Trent. And she found that many people believe Unilever is pushing its luck by trying to hike prices by 10%.
One resident, 70-year old Dennis, is even planning to boycott Unilever (echoing Tory MP David Davies earlier today).
“Everything about Marmite is local - the workers, the ingredients - so ultimately I do not understand their argument and it is just downright profiteering.
We do like our Marmite as a family, especially our daughter, but we’re now going to boycott their products as we’ve had enough of Unilever holding local businesses and their own workers to ransom.”
Here’s the full story:
Updated
This photo shows some of the scores of produces which Unilever supplies to UK retailers.
Many of them (unlike Marmite) will be produced abroad or rely on imported raw materials, thus vulnerable to the weaker pound.
Sky News’s Faisal Islam reckons Marmite lovers shouldn’t panic:
Plentiful supplies in this West London Tesco Express... don't want to encourage hoarding .... pic.twitter.com/HgPpqFsNOP
— Faisal Islam (@faisalislam) October 13, 2016
Expect New Year price hikes
Steve Dresser, retail analyst at Grocery Insight, expects retailers to hike prices in January - once the Christmas season is behind them.
He says:
“No one wants to put prices up ahead of Christmas. Others may just wait until January.”
“It’s only going to get more painful.”
Dresser also reckons Tesco is winning the PR battle so far, rather than being accused of bullying suppliers.
Is remarkable to consider that Tesco have come out well here; fighting price rises - in 2011 with Premier, was more about big bad Tesco.
— Steve Dresser (@dresserman) October 13, 2016
PR / rebranding efforts are working well it appears.... Fact is no one wants price hikes pre Christmas. But they are coming.....
— Steve Dresser (@dresserman) October 13, 2016
Media monitoring group Newton Insight report that the Tesco-Unilever spat has created particular interest in London, Scotland and Manchester (three places that voted to stay in the EU...).
And more men than women are opining....
How are the UK's customers responding on social media to the #Unilever and #Marmite price hike? NEWTON Insight looks at the #data. pic.twitter.com/HYoeg9J3PR
— NEWTON Media Global (@global_newton) October 13, 2016
Updated
This is the defence for Unilever trying to hike the cost of Marmite, even through it’s made in Britain rather than imported.
Why hard 2 fathom? #Unilever report earnings in € so must hike GBP prices to counter GBP weakness. Doesnt matter if Marmite is made in UK.
— Joshua Raymond (@Josh_RaymondUK) October 13, 2016
Clive Lewis MP, Labour’s Shadow Business Secretary, is also concerned that UK shoppers are going to be hit in the pocket:
“Once again the public are paying the price for Tory failure to make any contingency plans for Brexit.
This is unlikely to stop at a Marmite shortage – more and more retailers are going to be squeezed by higher import prices in the coming months, as hedging contracts end and the cheaper pound starts to squeeze margins.”
Politics professor Philip Cowley has trawled through some recent polling data, and found that Liberal Democrat voters will be particularly hurt by the Tesco-Unilever standoff.
It's Lib Dems who are hurting most. #Marmite pic.twitter.com/lcD4p1hVwD
— Philip Cowley (@philipjcowley) October 13, 2016
But a jump in poultry prices could cause Theresa May’s party some grief:
This'll get real if chicken is affected. pic.twitter.com/6QcT0UxhTH
— Philip Cowley (@philipjcowley) October 13, 2016
Updated
Labour MP Stephen Kinnock says the Marmite price wars show that Brexiteers’ optimism about leaving the EU was ill-founded.
“When the plunging pound stops you from getting PG Tips and Marmite in the supermarket, you’re truly starting to feel the first tremors of Brexit.
“David Davis’s claims that there were no downsides to Brexit are colliding with economic reality. The best thing the Government can do for economic confidence and the pound is to commit now to starting the upcoming negotiations on the basis of securing full and unrestricted access to the single market.”
One clarification: Tesco has insisted that Unilever products are still available in stores today, but not from its website.
The Press Association has been out and about, snapping Unilever products on Tesco shelves:
Reality is starting to bite about the practical impact of leaving the EU, writes our columnist Polly Toynbee.
Unilever says all its prices must rise by 10% – which is still less than the 15% fall in the pound, so expect worse to come.
The Unilever spat with Tesco over who pays is just a sideshow, as other retailers warn of steep price rises, as we import so many essentials. BT’s chairman says imported phones and broadband hubs are already up 10%. Each day the Financial Times reports more banks declaring they are moving significant functions abroad, while car manufacturers look to invest elsewhere in the EU for their new models.
As prices rise, the great majority of the population, whose incomes have been stagnant for nearly a decade, will see their living standards fall....
Here’s her full take:
We could get an explosion of rows between retailers and suppliers over price hikes early next year, reckons Markus Kuger of Dun & Bradstreet, the credit and risk firm.
He says UK firms are on “high alert”, and need to assess the impact of the weaker poudn on their customers and supplier now.
Companies, and particularly retailers, will be keen to reach the end of the year with little or no price increase. What happens in the new year is yet to be seen: Article 50 is likely to be invoked, and consumers will likely begin to feel the impact of the falling value of the pound.
Money transfer firm AFEX has cut its forecast for the pound, as the push towards Brexit continues.
Analyst Trevor Charsley reckons sterling will lose another 5% over the next five months, even if a legal challenge launched today succeeds.
“Sterling is going to remain under severe pressure in the near term as it continues to act as the release valve for market sentiment over the Brexit process. At the moment, the UK government is facing a legal challenge over parliamentary approval for Brexit.
If the government loses in the high court, there will be pandemonium and the possible start of a constitutional crisis while if it wins, the ‘hard’ Brexit course will be pursued and we’ve already seen what the market thinks of that. Either way it’s a lose-lose for sterling.
We think that we could see Sterling reach $1.15 against the Dollar by the end of Q1 2017.”
Updated
Prime minister Theresa May’s spokeswoman has confirmed that the government aren’t taking sides between Tesco and Unilever.
“It is a decision for companies how they market and sell their products ... It is a commercial decision.”
Conservative backbench MP David Davies* has launched a one-man Marmite boycott.
So Unilever using Marmite prices to punish us for Brexit. toast-spread fight back starts here. From now on It's Aussie made Vegemite for me. pic.twitter.com/vHHxNeoloy
— David Davies MP (@DavidTCDavies) October 13, 2016
* - Not to be confused with David Davis, the Brexit secretary, whose views on yeast-based spreads are unknown
Wise words from the Bishop of Burnley:
The real story here is not Tesco v Unilever but rising food prices and impact on the poor. Let's hope the food banks are Brexit-ready.
— Bishop Philip (@BpBurnley) October 13, 2016
Is the disappearance of Marmite from Tescos really more important than the laying-waste of Aleppo?
— Bishop Philip (@BpBurnley) October 13, 2016
Here’s our latest piece on the atrocities taking place in Syria’s second-largest city:
Ground down by savagery – the agony of Aleppo
Professor Andrew Fearne, of the University of East Anglia’s Norwich Business School also expects more Brexit price rows.
The price dispute between Tesco and Unilever is the first of many stand-offs that are inevitable as the implications of Brexit kick in and companies try to navigate a sustainable way forward.
The problem is that some companies will use the exchange rate as a vehicle for negotiating price rises that are a) avoidable and b) could leave some of their customers un-competitive, if they agree to pay more when others refuse.
The government isn’t keen to be dragged into the Tesco-Unilever Brexit price battle:
*Breaking*
— Jack Maidment (@jrmaidment) October 13, 2016
Leader of House David Lidington: "it's not for the Government to intervene" in dispute between 2 commercial companies.#Marmite
However, Lidlington may smell a Marmite-scented rat:
BREAK David Lidington, Cabinet minister tells MPs: "The ingredients (of Marmite) are not imported but are manufactured and supplied here."
— Christopher Hope (@christopherhope) October 13, 2016
Updated
High street chain WH Smith has revealed that it is also facing a hit from the slide in sterling.
The company took out a hedge against a stronger dollar, but it runs out next year, meaning imported stationery <corrected> will cost more.
CEO Stephen Clarke says Smiths is hoping to negotiate better prices from suppliers, and squeeze costs where possible.
“Since June 24, we have been talking to our suppliers and factories, looking at how we can reduce cost that might come through by consolidation of factories or through other productivity initiatives.”
Updated
The government responds....
David Lidington tries to calm fears of marmite shortage - reassures Jeremy Corbyn there is a "wealth" of organic alternatives in Islington
— kateferguson (@kateferguson4) October 13, 2016
Updated
The Marmite crisis has spread to the House of Commons, with shadow leader of the House Valerie Vaz raising the issue:
FINALLY THE ACTION WE NEED: Labour's Valerie Vaz demands the Govt does everything it can to keep Marmite on supermarket shelves.
— Jack Maidment (@jrmaidment) October 13, 2016
That didn't take long - Valerie Vaz mentions the national marmite shortage in the Commons. Says "first week back and there's a crisis..."
— kateferguson (@kateferguson4) October 13, 2016
Updated
The Breaking View’s team at Reuters reckon that Tesco has the upper hand in the Brexit price war.
The maker of Dove soap wants supermarkets like Tesco to pay more for its goods as the pound weakens. They can’t easily pass that cost on to shoppers.
Grocers have two reasons to play tough: Unilever’s 15% operating margin, and their access to the consumer.
Expert: More Brexit price rows are coming
There’s a serious risk that more suppliers and retailers will clash over price rises in the months ahead.
That’s because the financial safety measures that some companies took, to insulate themselves from a sterling crash, would typically only last a few months.
Roy Williams, managing director of supply chain firm, Vendigital, explains:
“More disputes over prices are likely in the coming months, as many of the currency hedges that suppliers put in place to protect them from exchange rate changes, start to run out. Ultimately, the effect of these cost increases will be felt by consumers.”
Williams also has some sympathy for Unilever:
“Anyone that thinks Unilever is just trying it on, are wrong. The cost pressures facing many UK suppliers are very real at the moment. Deep falls in the value of the pound since the EU referendum are cutting deeply.
“However, Unilever may not have thought its position through carefully enough. Pursuing across-the-board price increases from customers is a blunt attempt to offset rising costs and this kind of approach would not stand up to detailed cost analysis by Tesco.
Updated
A handy list of what’s at stake:
Tesco products at risk:
— Alberto Gallo (@macrocredit) October 13, 2016
Marmite
Pot Noodle
Ben & Jerry's
Comfort conditioner
Hellmann’s mayo
Knorr cubes
Persil
Dove
Colman’s mustard
Bernstein analyst Bruno Monteyne reckons Tesco would typically hold one to two-week’s worth of stock. So it might avoid serious shortages in stores, if it can kiss and make up with Unilever quickly.
Monteyne adds:
“While politicians can deny reality, a shampoo produced on the continent is now 17 percent more expensive.
This isn’t about Tesco or Unilever but about all UK retailers and suppliers.”
The pound has dipped by 0.25% against the euro this morning, to €1.106.
That means sterling has shed more than 15% against the single currency since June’s referendum (when one pound bought you €1.30).
That has a serious knock-on effect on a company, such as Unilever, which reports its financial results in euros.
Updated
Tesco runs short on Marmite and other Unilever goods: share your photos
Is your local Tesco out of Marmite? What about Persil, Surf, Dove, Comfort, Ben & Jerry’s ice cream, Elmlea, Colman’s, Helmann’s, Knorr, Bertolli, Flora, Comfort and Pot Noodle?
Guardian Witness want to know if the row between Tesco and Unilever is causing problems in the aisles.
Has there been a run on marmite and other staples in your local supermarket? Share your photos of empty shelves with us - we’ll post a selection of them in the blog.
Today’s selloff is pushing the pound close to the levels hit on Tuesday evening, when sterling suffered quite a wobble.
It’s currently trading at $1.216, down 17% since June’s referendum.
Conservative MP Sir Gerald Howarth has warned Unilever not to try to profiteer from the slump in sterling.
He said the firms’s reputation would be damaged “if they seek to use the fall in the pound to exploit the consumer”.
(that’s via the Press Association)
The sight of Pot Noodles, PG Tips teabags and Knoor stock cubes vanishing from Tesco’s shelves could be the moment when the pound’s vicious tumble hits home to the public.
Currency expert Kit Juckes, of French bank Societe Generale, says:
Yesterday, the implications of the pound’s fall on prices and retailer margins hit home for the wider public as the country’s leading supermarket engaged in a war over prices with its highest-profile supplier of branded goods.
Either UK consumers will eat store-branded yeast extract, or they’ll pay more for Marmite, or the impact of the pound’s fall will be shared between supplier and retailer.
And other Marmite substitutes are available:
So this is what sovereignty looks like. #Brexit #Marmite pic.twitter.com/6RMajJ8rwo
— Tom Mannington (@FetchezLaVache_) October 12, 2016
The Daily Mail has responded to the commercial tensions between Tesco and Unilever with typical restraint:
Over in the City, a wave of selling has dragged the FTSE 100 index back below the 7,000 mark.
Mining stocks are leading the rout, following disappointing trade data from China. Chinese exports fell by 10% in September, which implies its economy is slowing faster than hoped -- which translates to less demand for raw materials.
Tesco and Unilever are also pulling the London stock market down, as the Marmite price war alarms investors.
Neil Wilson of ETX Capital says the City isn’t impressed by the “squabbling” between Tesco and Unilever over price rises.
That’s why both company’s shares are dropping this morning:
Tesco may simply be trying to call Unilever’s bluff over price hikes but markets are not impressed. Unilever market share is an issue as Tesco is by far Britain’s leading retailer, although just how long can people go without Marmite and PG Tips is unclear. Tesco sales could suffer if consumers head to competitors for their favourite brands.
Unilever dropped 2% on the open despite posting better than expected sales – a sign that shareholders are worrying about broader market conditions that chief executive Paul Polman said were ‘weak and volatile’. Tesco was down 2.5% at the start of play.
Sainsbury’s and Morrisons were also lower, reflecting nerves about cost pressures at the big retailers as the slump in sterling hits home. A weaker pound can only mean higher prices for consumers or lower margins for suppliers and retailers, or a combination of all of these.
Unilever and Tesco shares slide
Shares in Unilever and Tesco have both fallen this morning.
Tesco has dropped by 2.5%, as traders ponder the financial implications of losing a swath of popular brands from its shelves.
Remarkable bust-up between @Tesco and @Unilever. As of this morning the supermarket has stopped buying all 40-odd of Unilever's UK brands.
— Joel Hills (@ITVJoel) October 13, 2016
Unilever are also in the red, down 2%, despite beating analyst forecasts this morning.
Underlying sales increased of 3.2% in the last quarter, although unfavourable currency movements did hurt sales growth.
Updated
Unilever’s finance chief has defended the company’s attempt to hike prices following the decline in sterling.
Graeme Pitkethly told Reuters that it’s just a normal part of business:
“This is just devaluation-led cost increase, this is just quite normal,”
Labour MP Wes Streeting tweets:
If people are worried about losing marmite from Tesco, wait until they find out about jobs...
— Wes Streeting MP (@wesstreeting) October 13, 2016
Brexit price war: what the experts say
The price row between Tesco and Unilever is an important moment in the Brexit story, analysts say.
The sight of Unilever’s products vanishing from the shelves of Britain’s largest retailer is “another tangible sign of the power of the weak pound” in a global economy, argues Kathleen Brooks of City Index.
She writes:
Some corners of the press are up in arms about how consumers are being held to ransom by a prominent remain campaigning corporate, however, this is what globalization is: an EU company owns quintessentially British goods such as Marmite.
Overall, this stand off is not good for anyone, least of all Unilever, who could see reputational damage here in the UK, they are also likely to lose market share if its goods are not stocked in Tesco, and we would expect an agreement to be reached by both sides. Tesco is likely to stick to its guns, however, and play hardball with Unilever; only last week its CEO announced a new round of price reductions as part of the turnaround plan for the retail giant.
The row is also a warning sign to consumers that prices are going to be pushed up, Brooks adds:
The Tesco/ Unilever battle is the latest fallout from Brexit, and since the pound dipped further overnight, back below 1.22 after a hawkish tone in the minutes from the Fed’s September meting, price wars are likely to heat up. The supermarkets are likely to try and resist price increases since most of them are trying to cut prices to attract consumers. However, this episode highlights how quickly weakness in the pound can effect us all in the pocket.
Duncan Weldon of Resolution Group agrees that consumers are going to face higher prices in the shops:
Retail margins are too thin to swallow this FX hit. Price rises are coming. But the Tesco/Unilever spat is good brand management for Tesco.
— Duncan Weldon (@DuncanWeldon) October 13, 2016
Britain, a nation of Marmite stockpilers?
Only two jars of Marmite left this morning. #marmitewatch pic.twitter.com/T8NIHpKpda
— Nick Sutton (@suttonnick) October 13, 2016
Tesco is running out of Marmite and Persil. It's all gone a bit 1970s 'winter of discontent'.
— Andrea Catherwood (@acatherwoodnews) October 13, 2016
Introduction: Pound is back below $1.22
Good morning, and welcome to our rolling coverage of the world economy, the financial markets, the eurozone and business.
There’s no escape from the financial implications of Brexit today.
The pound has started the day on the back foot, dropping by half a cent to $1.216.
That means sterling is close to its all-time lows, on a ‘trade-weighted basis’, as global markets assess Britain’s likely fate out of the EU.
Yesterday, Brexit secretary David Davis sent the pound dipping by hinting that Britain could well exit the single market, even though this would have serious implications for exporters and the financial services business.
But that warning was eclipsed by the news that Tesco and Unilever were coming to (metaphorical) blows in a pricing row apparently triggered by the slump in sterling.
Products including like Marmite, Ben & Jerry’s ice cream, , PG Tips tea, Knorr, Bertolli and Pot Noodles are hit, after Tesco refused to accept Unilever’s demand for a price rise.
They’ve also vanished from the Tesco website, as news of the row hits the front pages:
Tomorrow's Daily Telegraph front page: Brexit price row over Marmite #TomorrowsPapersToday pic.twitter.com/eOx88NjI5b
— The Telegraph (@Telegraph) October 12, 2016
It’s not quite clear why Marmite should be particularly sensitive to sterling’s troubles – this nectar of the gods is carefully crafted in the Midlands, from leftover piles of brewer’s yeast.
One source told us:
“Unilever is using Brexit as an excuse to raise prices, even on products that are made in the UK.”
But there’s no doubt that raw materials imported into the UK, by Unilever or anyone else, will cost more today.
The pound has shed around 17% against the US dollar since June, which is an unpleasant pill for companies to swallow <insert Pot Noodle joke here>.
Unilever are actually reporting their financial results today, so we should hear more from them about the issue shortly....
Updated