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The Guardian - UK
The Guardian - UK
Business
Graeme Wearden

Unilever and Tesco resolve Brexit price rise row – as it happened

A single jar of Marmite remaining on the shelf of a Tesco store in Victoria, London.
A single jar of Marmite remaining on the shelf of a Tesco store in Victoria, London. Photograph: Yui Mok/PA

Closing post

Unilever’s Marmite on the shelves of a small independent supermarket in Burton.

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:

Tesco.com
Disappointment for Marmite lovers Photograph: Tesco.com
Tesco.com
Pot Noodles are off the menu too Photograph: Tesco.com

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: 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.....

Updated

Some snap reaction to the peace deal between Tesco and Unilever:

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.

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.

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.

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.

Tusk also seemed to rubbish the idea (popular with foreign secretary Boris Johnson) that Britain could have its Brexit cake and eat it.

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.

European stock markets

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).

A branded taxi stands outside Unilever’s Marmite factory in Burton upon Trent, Britain.
A branded taxi stands outside Unilever’s Marmite factory in Burton upon Trent, Britain. Photograph: Darren Staples/Reuters

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.

Some Unilever products

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:

An empty shelf where Marmite should be in a Tesco store in Andover, Hampshire.
An empty shelf where Marmite should be in a Tesco store in Andover, Hampshire. Photograph: Andrew Matthews/PA

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.

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....

Updated

This is the defence for Unilever trying to hike the cost of Marmite, even through it’s made in Britain rather than imported.

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.

But a jump in poultry prices could cause Theresa May’s party some grief:

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:

undefined
An empty shelf for Unilever’s Pot Noodles at a Tesco store in Royston, Hertfordshire. Photograph: Chris Radburn/PA
Jars of Marmite are displayed for sale on a shelf at a Tesco supermarket in Basildon, Britain.
Jars of Marmite are displayed for sale on a shelf at a Tesco supermarket in Basildon, Britain. Photograph: STAFF/Reuters
Two tubs of Flora at a Tesco store in Royston, Hertfordshire.
Two tubs of Flora at a Tesco store in Royston, Hertfordshire. Photograph: Chris Radburn/PA

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.

* - 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:

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:

However, Lidlington may smell a Marmite-scented rat:

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....

Updated

The Marmite crisis has spread to the House of Commons, with shadow leader of the House Valerie Vaz raising the issue:

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:

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.

The pound vs the US dollar since April
The pound vs the US dollar since April Photograph: Thomson Reuters

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:

The Daily Mail has responded to the commercial tensions between Tesco and Unilever with typical restraint:

Oh honestly
Never knowingly under-outraged. Photograph: Daily Mail

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.

The top fallers in London this morning
The top fallers in London this morning Photograph: Thomson Reuters

Tesco's web site

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.

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:

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:

Britain, a nation of Marmite stockpilers?

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:

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

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