Last week was all about a divided nation. Were you cheering or crying when Marmite was removed from Tesco’s shelves?
The delicious irony that Dave Lewis, CEO of Tesco, used to work for Unilever, the makers of Marmite and various other food and non-food products, was of course the cherry on top of the public spat between the two companies. A national Marmite shortage was threatened as Tesco refused to accept a major price increase from Unilever on this and other brands. Of all the things we might expect from Brexit, a Marmite crisis was not one of them.
But, just in the nick of time a (secret) deal between the two companies saw the disaster averted. Nonetheless, it was a good story and one that produced more than a few headlines and commentary. Marmite was not the only product affected, but it was Marmite that made it such a great story. Marmite – a product you either love or hate – removed from retail shelves by the plunging pound, brought on by Brexit – another conception you either love or hate. And despite David Davis’ ludicrous assertions in Parliament, 51.9% is NOT ‘overwhelming’; we are very much split on Marmite.
The origins of the public row seem to lie in Unilever wanting to bring in a 10% price hike on many of their products. Tesco – though other retailers were involved, albeit less publically – rebelled against this, saying they could not absorb such a price rise and would not pass it on to their customers. Unilever said the price rises are needed and necessary as the pound has fallen so much since the Brexit vote, pushing up the import prices to the UK and raw materials generally. Given Marmite is made in the UK, the rationale seemed to be spread a little thin. Despite the press headlines, the price rise was for a basket of products, though most of them also seemed to be made in the UK. Sympathy for Unilever was in short supply.
Pictures of empty shelves began to appear quite quickly, as in the one below of the lack of Flora in my local Tesco. Online shopping for such products seemed to be even more adversely affected.
In one sense the specifics don’t matter – not that they ever did in the Leave Europe campaign anyhow. It was all about perception; and Tesco won that hands down. The plunging pound will no doubt drive up import prices. This will lead to products being more expensive and increased inflation. Manufacturers and retailers will battle to try to get their share of costs covered (manufacturers) or sales and competitive position protected (retailers). But, in the end we will no doubt see prices for consumers rise or products shrink further.
My second photo below is a snip from a Twitter exchange over the weekend (courtesy of @retailbarcode). A lot of tweets I saw focused on Marmite or on Naked Wines increasing their wine prices (by 5%). But this one took the opposite approach, and is least a product made elsewhere. Toblerone explained that due to price increases some of their UK bars were going to shrink , by a factor of 10%+. I bet the price remains the same or increases as well. This is a harbinger of things to come I suspect.
For Tesco, hot on the heels of some better financial results, being seen to be on the consumers’ side harks back to the Jack Cohen anti-RPM days and is a good stance especially if they fear competitors may not want to pass on price rises (notably the discounters). They certainly came out of the affair with more positive publicity. But the brands Unilever produce are some of the ‘big beasts’ of the food branding world. Consumers love them – well not so much Marmite – and will want to see them in stock. Whether they want to see the price tag attached as Brexit takes full hold on our lives is another matter of course. Food deflation may well be a thing of the past, due to the aftershocks of the 23rd June, as the pound and today’s inflation figures show.
It is worth noting that other yeast extracts are of course available; but they are not Marmite. I wonder how many substitutes were rejected in online deliveries this week?
Another interesting blog, and yes the short-lived dispute between the world’s major fmcg group and the world’s 3rd largest retailer caught the imagination of the media and public. It was interesting that of the 30 or so major brands involved it was “all about Marmite” with some resulting extremely funny and clever comments on social media! I expected a quick resolution as both parties had too much to lose. The lack of sympathy for Unilever was by amplified by the fact that, as at the latest reporting period, their operating profit margins were c10x that of Tesco.
Given the supply chain involved, I don’t imagine that Tesco lost too many sales of Unilever brands and in fact the “panic buying” that the media coverage encouraged probably pulled forward sales.
If the stand-off had continued for another day or two it might have been a different situation of course.
By the way Dave Lewis is a graduate of Nottingham Business School(NBS) – or Nottingham Trent Polytechnic as it was in the late ’80’s when he was a student here. He also has a Honorary Doctorate from Nottingham Business School awarded a few years ago. He was with 50 or so NBS academics and IoD members last Friday for a fascinating one hour Q&A session and whilst the focus was on his career ( the Marmite issue had of course been resolved the evening before) and how he had gone from a student to his current role, IMHO he came over as an extremely grounded, honest and open business leader – extremely impressive. Listening to what he had to say, I’m not really surprised he appears to be starting to turn the Tesco supertanker around. I’d back him to complete the job.
Thanks for the comment. Interesting last part – they do seem to have righted the ship and there is a basis there now to develop. It is going to be interesting to see what happens.