Unilever boss says Tesco Marmite row will be 'resolved soon' as Brexit pound slump dents sales

Graeme Pitkethly said price increases are a 'normal' part of doing business

Thursday 13 October 2016 15:37 BST
The boss of the brand behind Marmitegate predicts tough market conditions will continue
The boss of the brand behind Marmitegate predicts tough market conditions will continue (Reuters)

Graeme Pitkethly, Unilever's chief financial officer, has defended the company in its dispute with Tesco over the price hikes for dozens of popular brand from Marmite to PG Tips tea.

Unilever has demanded a 10 per cents hike in prices for its goods from the supermarket to compensate for the pound’s fall against the dollar and the euro since UK voted to leave the EU in June.

Tesco has refused to pay more and its stores are now running low on Hellmann’s mayonnaise, Pot Noodle and Ben & Jerry’s ice cream after Unilever halted deliveries to the supermarket.

Pitkethly said that he is "confident" that the Marmite maker's row with Tesco over price hike would be “resolved soon”.

He added that price increases were a "normal" part of doing business.

He said: “Price increases are landed with most of our customers.”

“We are taking price increases in the UK. That is a normal devaluation-led cycle. Where costs are higher, we will manage it through pricing but we do it subject to [consumer] affordability.”

Unilever shares were down more than 3 per cent on Wednesday afternoon, overshadowing it third-quarter trading figures, which showed sales growth of 3.2 per cent, ahead of the 2.9 per cent analysts had expected.

While Tesco shares fell by more than 2 per cent in early trading.

The shortage of some of Britain's best loved brands could be a clear illustration for consumers of the turbulence unleashed by the Brexit vote.

Clive Lewis MP, Labour’s Shadow Business Secretary, said he is 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.”

Professor Andrew Fearne, of the University of East Anglia’s Norwich Business School, also expects more Brexit price disputes.

"This 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.”

On Monday, the British Retail Consortium (BRC) warned that British shoppers could face higher prices if the Government fails to strike the right Brexit deal with the EU.

“The BRC will be ensuring that in the forthcoming Brexit talks government negotiators have their sights set firmly lowering import costs as well as avoiding any increase in tariff costs as the UK leaves the EU,” Helen Dickinson said

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