Marmite and Toblerone point to trouble ahead

Rick Pendrous: the Unilever/Tesco Marmite row is a sign for things to come

The recent spat between Unilever and Britain’s biggest retailer Tesco over the Marmite brand owner’s attempt to raise its price, was a clear sign of things to come in life after the Brexit vote.

While it wasn’t quite clear how Unilever’s argument about rising input costs stacked up for a product whose ingredients are primarily sourced in the UK, the falling value of sterling is certainly having an adverse impact on many food and drink products based on commodities that are largely priced in dollars or euros. And, then there are also rising packaging and distribution costs to be factored in.

Elsewhere, Toblerone’s owner Mondeléz was caught in a social media storm, with much adverse press reaction to its unsubtle move to cut costs by redesigning its iconic choccy bar and increasing the gaps between triangles.

To be fair, the industry has been surreptitiously reducing bar and pack sizes for ages, as ingredients costs have soared.

Unilever and Tesco, apparently, came to an undisclosed compromise over Marmite. But, by all accounts, sales of Marmite were boosted by all the free publicity it received.

Unilever and Tesco

So, even if it had to back down over the salty spread, it was not all bad for Unilever.

Other brand owners – not to mention own-label producers – with less muscle, however, are likely to fare far worse when it comes to trying to pass on cost increases.

The supermarkets are never slow to point out that their margins are already wafer thin and often much less than their manufacturing suppliers.

So, what with a price war raging between each other and the limited assortment discounters Aldi and Lidl, their margin pips really are squeaking, they claim.

Ah, plus c’est change … as we used to say before Brexit.

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