After a tense 24 hours where a string of famous British brands we are risk of disappearing from UK supermarket shelves, Mintel’s Director of Research EMEA and Director of Retail Research, look at the implications of Marmitegate. Toby Clark , Director of Research, EMEA: Anyone of a certain age will remember the political comedy Yes Minister. (For younger readers, think “The Thick of It” but with fewer open plan offices and much, much less swearing.) And they’ll remember that a battle against the EEC’s bid to standardise the eurosausage was instrumental in Jim Hacker’s rise from Minister to Prime Minister. The Unilever/Tesco standoff is another reminder that you mess with British breakfasts at your peril. Financial services passporting? Freedom of movement? ECHR? Hard Brexit or soft Brexit? All of this pales against the threat of a national Marmite shortage. Needless to say, the standoff was about much more than Marmite. Unilever owns some of the most iconic brands on the grocery aisles, while Tesco is the UK’s largest grocer. It was inconceivable that the two companies wouldn’t find a solution to the dispute, and that’s exactly what has happened. But this won’t be the last argument about pricing. The truth is that neither manufacturers nor retailers will be able to entirely absorb the impact of the fall in the value of sterling. Producer price inflation was 7.6% in the year to August 2016, compared to consumer price inflation of 0.6%. There is only so long that a gap that wide can be sustained. And consumers recognise this. In September, Mintel asked people whether they thought the impact of the EU vote would be positive or negative. On many measures, people were actually pretty positive. On balance, people think that it’ll be good for the economy’s growth, and they were neutral when it comes to the effect it’d have on their household income and career prospects. When it comes to the cost of living, though, people were much less optimistic. 39% thought that it’d be negative for the cost of living, compared to 23% who thought it’d be positive. The only other factor that came close was the impact on the value of people’s savings and investments, where 30% thought it’d be negative and just 18% that it’d be positive. So the fact that Unilever is trying to push through price increases probably won’t come as a huge surprise to many people: they’re already expecting the Brexit vote to start to feed through into prices. What they won’t have expected, though, is that it might threaten their access to Marmite. Not even the most pessimistic “Remain” campaigners ever suggested anything as quite as terrifying as this scenario. Richard Perks, Director of Retail Research: In the short term this is a battle of wills and the question will have ultimately come down to whether Unilever felt that it’d suffer more without Tesco than Tesco would without Unilever. Neither party has released any details of how the dispute was resolved, but it’s fair to assume that they found a compromise solution, and the balance of power seems to be pretty even. However, given the depreciation of sterling since the Brexit vote, increases in prices must be inevitable at some stage. We had supposed that retailers – and manufacturers, would have covered themselves forward against currency fluctuations at least until the end of the year. So in that respect, we’re slightly surprised that Unilever had moved so fast. But there’s another side to it that is very encouraging both for Tesco and the food retailing sector. This whole spat shows that Tesco is prepared to lead the food retailing sector again. It is easily the largest retailer in the sector and it has been very low key while Dave Lewis has effected a remarkable turnaround. But by taking this very public stand Tesco has sent a signal to the rest of the sector to follow its lead. Only Tesco could have done this but by doing it, it is inviting the other majors to follow. One cannot ignore the fact that in posing as a consumer champion Tesco has also gained valuable PR and in doing so it has stolen a lead on its competitors. (Although Asda’s marketing team also deserve credit for how quickly they were able to roll out a cheeky response to the standoff, highlighting that not only do they have plenty of Marmite in stock, but also that they’re cut the cost to £2 a jar.) But even given Asda’s quickfire response, it seems to us that it’s Tesco who has won this particular skirmish, at least in PR terms. Tesco has been seen to be standing up to one of the major forces in the industry in a way that will strike a chord with consumers. Toby is the Director of Research EMEA at Mintel, where he has worked for over 10 years. Toby leads a large team of researchers who produce over 500 business reports annually on UK and European market sectors. Prior to this, Toby was Head of UK Financial Services research at Mintel. Richard Perks is Director of Retail Research at Mintel where he advises clients, writes retail reports and presents webinars. Richard joined Mintel in 1999 and previously headed the Retail team, overseeing the content and strategy of the retail reports. He regularly provides analysis to the global media on retail issues. Before joining Mintel, Richard worked as a City analyst and as a journalist. You might also be interested in: No related posts.