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Tesco vs Unilever: The Retail Rumble in the Jungle sponsored by Brexit

Unilever products are disappearing from the supermarket’s shelves after the supplier tried to impose price increases. Brexit is to blame

James Moore
Thursday 13 October 2016 14:02 BST
You’ll struggle to find Marmite here. Tesco is refusing to pass on Unilever’s Brexit price hikes
You’ll struggle to find Marmite here. Tesco is refusing to pass on Unilever’s Brexit price hikes (Getty)

It’s the retail Rumble in the Jungle. A pair of top-class corporate heavyweights slugging it out in public, just as Ali and Foreman did all those years ago. The modern day version pits Tesco v Unilever in a bout sponsored by Brexit, Vote Leave, and Boris Johnson.

Unilever landed the first blow, hitting Britain’s biggest supermarket with a painful left jab to the face by hiking its prices as a result of the Brexit induced fall in the pound.

Tesco responded with an upper cut, refusing to play ball. Unilever came back with a one-two combination, as deliveries stopped and its products started to disappear from Tesco’s shelves.

Stocks of Marmite are now starting to run out, and more besides, as the pugilists dance around each other. Expect them to attempt to land a few more punches via their PR people.

There’s some added spice to the bout because Tesco’s chief executive David Lewis cut his teeth as an executive at Unilever. Hilarious.

Shoppers, whose ringside seats suddenly aren’t so comfortable, might not be so amused. Tough luck. This is what the Brexiteers among them voted for. This is part of the economic price that Remainers warned of.

Project Fear? It is indeed over. We’re now living with the frightening reality. That reality will see inflation roaring back as a consequence of the UK having the sort of currency even a banana republic would turn its nose up at, making imported goods much more expensive. Fun fact: the UK imports most of its consumer goods.

The problem facing both Tesco and Unilever is that neither has much room for manoeuvre when it comes to dealing with the unwelcome cost of a falling currency. Unilever’s troubles can be seen in its latest trading statement. It took a 3.4 per cent hit from currency movements. Had they remained stable its sales would have risen handily. Instead they declined. Its profits for the year are set to fall quite sharply.

With shareholders to keep happy it’s passing its costs on to its customers, such as Tesco.

But Tesco has even bigger problems. It has to worry about what Aldi does. What if the discounter decides to eat the cost of sterling’s fall?

Aldi has a big advantage over Tesco. It doesn’t have to worry about Unilever, because it stocks its own rival brands, sourcing them from where it can get them cheapest. This is a powerful weapon in the German outfit’s competitive armoury. As a family owned business that thinks long term, it can also afford to sacrifice some profit in an attempt to grab market share.

If you must have Marmite, or any of Unilever’s other brands (it has loads), you might have to try another grocer. Tesco’s rivals could try and put Marmite on promotion to kick sand into its face. But they’re ultimately in the same boat as Tesco. They will eventually have to increase prices or take Unilever’s products off their shelves, at least if they want to avoid collapsing their share prices.

Brexit blackmail, screamed the Daily Mail in an attempt to lay the blame at Unilever’s feet. It is nothing of the sort. It is basic business. When costs rise they get passed on. The Brexit-driven fall in the pound is increasing suppliers’ costs, so they’re passing them on. QED.

In the end this Rumble in the Retail Jungle will probably end in some sort of draw. The two sides will work out a deal, you’ll find Marmite reappearing on Tesco’s shelves and the two sides’ executives will get some nice invites to the each other’s corporate boxes, wherever they may be.

However that pans out, your Marmite will be getting more expensive. So will other products. There will be those who ask: aren’t some of Unilever’s offerings made here? That’s true but the cost of making them is still rising. You want a starter for 10? Fuel, which is priced in dollars. And that’s just for starters.

The consumer will be sheltered to a certain extent by the continuing supermarket price war and by the fact that a lot of other retailers have currency hedges in place.

When they unwind, get ready to welcome some serious inflation back into your lives. Prepare yourselves for higher mortgage rates and higher prices and Remainers indulging in black humour while saying “I told you so”.

Oh, and just wait for the holiday-buying season at the end of the year. If you think Unilever’s attempt to impose price rises of 10 per cent, or whatever, looks bad, you ain’t seen nothing yet. Seconds out...

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