Unilever’s chief financial officer has defended the company in its row with Tesco over price increases for household brands ranging from Marmite to Persil, describing the hikes as “normal”, reports The Guardian.
Tesco is running low on stock of a number of Unilever products and has taken dozens off its website, including Marmite, Ben & Jerry’s ice cream and Lynx body spray.
Unilever, one of Britain’s biggest suppliers of branded food and household goods, is thought to have halted deliveries after the two companies disagreed over prices. It is trying to charge Tesco an extra 10 per cent for its goods, blaming the pound’s fall against the euro and the dollar since the Brexit vote on 23 June.
Graeme Pitkethly, Unilever’s finance chief, said on Thursday morning that price increases to offset rising costs were a normal part of doing business. “We are taking price increases in the UK. That is a normal devaluation-led cycle,” he said.
He said he was confident that the dispute would be “resolved pretty quickly”.
The UK accounted for less than 5 per cent of Unilever’s business, Pitkethly said, as the company announced better than expected quarterly results after pushing through price increases around the world. The company posted underlying sales growth of 3.2 per cent for the past three months, ahead of analysts’ expectations.
Shares in Unilever and Tesco opened lower on Thursday, with Unilever down by 2 per cent and Tesco falling by 2.5 per cent. Neil Wilson, a markets analyst at ETX Capital, said: “Against the backdrop of its spat with Tesco, the statement has particular resonance and highlights how cost pressures are creeping into UK retail, potentially knocking dividends and share prices for a number of well-known stocks.”
Unilever has also tried to charge more from other retailers, including Sainsbury’s, Asda and Morrisons. Speaking on Wednesday night, a source said: “Unilever is using Brexit as an excuse to raise prices, even on products that are made in the UK.”
Marmite is produced in the UK. Unilever pointed out that commodities are priced in dollars, affecting the cost of products even if they are made in Britain.
In some areas of the country, a number of Unilever brands have sold out. They include Persil, Surf, Dove, Comfort, Ben & Jerry’s, Elmlea, Colman’s, Helmann’s, Marmite, Knorr, Bertolli, Flora, Comfort and Pot Noodle.
Tesco said: “We are currently experiencing availability issues on a number of Unilever products. We hope to have this issue resolved soon.”
Meanwhile, Marmite fans appear to be unfazed by the dispute, posting pictures of emptying Tesco shelves on social media and, in one case, selling a used jar of Marmite on eBay for £100,000. Philip Walker, a St John Ambulance regional manager from Exeter, Devon, told Press Association that he eats Marmite every day and has 12 branded items in his kitchen, with replica versions of each of the special edition jars and more standard Marmite in the cupboard.
“I have quite a good stock, so it won’t stopping me going to Tesco.
“I am more angry at Unilever than I am at Tesco. It seems Unilever is using Brexit as an excuse to hold Tesco customers to ransom,” he said.
Nicholas Hyett, an equity analyst at Hargreaves Lansdown, said: “Tesco may choose to stand its ground on pricing, but history suggests that if other retailers can stomach the increase, consumers will be willing to stump up to get their Unilever fix.”
He noted that Unilever had raised prices by 15.5% in Latin America after a currency devaluation. Despite the increase, consumers largely kept buying its products, with sales volumes down 5%.
“That is at the root of Unilever’s success. The strength of its brand portfolio gives it the power to increase prices with only minimal impact on demand for its products,” Hyett said. “Furthermore, its global footprint means that it is not overly dependent on the fortunes of a single country, or beholden to the demands of a single supplier.”
