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Pound falls below $1.22 as Brexit sparks Marmite price row – business live Pound falls to $1.22 as Brexit sparks Marmite price row – business live
(35 minutes later)
10.48am BST
10:48
The government responds....
David Lidington tries to calm fears of marmite shortage - reassures Jeremy Corbyn there is a "wealth" of organic alternatives in Islington
10.46am BST
10:46
The Marmite crisis has spread to the House of Commons, with shadow leader of the House Valerie Vaz raising the issue:
FINALLY THE ACTION WE NEED: Labour's Valerie Vaz demands the Govt does everything it can to keep Marmite on supermarket shelves.
That didn't take long - Valerie Vaz mentions the national marmite shortage in the Commons. Says "first week back and there's a crisis..."
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10.34am BST
10:34
The Breaking View’s team at Reuters reckon that Tesco has the upper hand in the Brexit price war.
The maker of Dove soap wants supermarkets like Tesco to pay more for its goods as the pound weakens. They can’t easily pass that cost on to shoppers.
Grocers have two reasons to play tough: Unilever’s 15% operating margin, and their access to the consumer.
10.21am BST
10:21
There’s a serious risk that more suppliers and retailers will clash over price rises in the months ahead.
That’s because the financial safety measures that some companies took, to insulate themselves from a sterling crash, would typically only last a few months.
Roy Williams, managing director of supply chain firm, Vendigital, explains:
“More disputes over prices are likely in the coming months, as many of the currency hedges that suppliers put in place to protect them from exchange rate changes, start to run out. Ultimately, the effect of these cost increases will be felt by consumers.”
Williams also has some sympathy for Unilever:
“Anyone that thinks Unilever is just trying it on, are wrong. The cost pressures facing many UK suppliers are very real at the moment. Deep falls in the value of the pound since the EU referendum are cutting deeply.
“However, Unilever may not have thought its position through carefully enough. Pursuing across-the-board price increases from customers is a blunt attempt to offset rising costs and this kind of approach would not stand up to detailed cost analysis by Tesco.
Updated
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10.14am BST10.14am BST
10:1410:14
A handy list of what’s at stake:A handy list of what’s at stake:
Tesco products at risk:MarmitePot NoodleBen & Jerry'sComfort conditionerHellmann’s mayoKnorr cubesPersilDove Colman’s mustardTesco products at risk:MarmitePot NoodleBen & Jerry'sComfort conditionerHellmann’s mayoKnorr cubesPersilDove Colman’s mustard
10.08am BST10.08am BST
10:0810:08
Bernstein analyst Bruno Monteyne reckons Tesco would typically hold one to two-week’s worth of stock. So it might avoid serious shortages in stores, if it can kiss and make up with Unilever quickly.Bernstein analyst Bruno Monteyne reckons Tesco would typically hold one to two-week’s worth of stock. So it might avoid serious shortages in stores, if it can kiss and make up with Unilever quickly.
Monteyne adds:Monteyne adds:
“While politicians can deny reality, a shampoo produced on the continent is now 17 percent more expensive.“While politicians can deny reality, a shampoo produced on the continent is now 17 percent more expensive.
This isn’t about Tesco or Unilever but about all UK retailers and suppliers.”This isn’t about Tesco or Unilever but about all UK retailers and suppliers.”
9.58am BST9.58am BST
09:5809:58
The pound has dipped by 0.25% against the euro this morning, to €1.106.The pound has dipped by 0.25% against the euro this morning, to €1.106.
That means sterling has shed more than 15% against the single currency since June’s referendum (when one pound bought you €1.30).That means sterling has shed more than 15% against the single currency since June’s referendum (when one pound bought you €1.30).
That has a serious knock-on effect on a company, such as Unilever, which reports its financial results in euros.That has a serious knock-on effect on a company, such as Unilever, which reports its financial results in euros.
UpdatedUpdated
at 9.59am BSTat 9.59am BST
9.50am BST9.50am BST
09:5009:50
Tesco runs short on Marmite and other Unilever goods: share your photosTesco runs short on Marmite and other Unilever goods: share your photos
Is your local Tesco out of Marmite? What about Persil, Surf, Dove, Comfort, Ben & Jerry’s ice cream, Elmlea, Colman’s, Helmann’s, Knorr, Bertolli, Flora, Comfort and Pot Noodle?Guardian Witness want to know if the row between Tesco and Unilever is causing problems in the aisles.Is your local Tesco out of Marmite? What about Persil, Surf, Dove, Comfort, Ben & Jerry’s ice cream, Elmlea, Colman’s, Helmann’s, Knorr, Bertolli, Flora, Comfort and Pot Noodle?Guardian Witness want to know if the row between Tesco and Unilever is causing problems in the aisles.
Has there been a run on marmite and other staples in your local supermarket? Share your photos of empty shelves with us - we’ll post a selection of them in the blog.Has there been a run on marmite and other staples in your local supermarket? Share your photos of empty shelves with us - we’ll post a selection of them in the blog.
9.40am BST9.40am BST
09:4009:40
Today’s selloff is pushing the pound close to the levels hit on Tuesday evening, when sterling suffered quite a wobble.Today’s selloff is pushing the pound close to the levels hit on Tuesday evening, when sterling suffered quite a wobble.
It’s currently trading at $1.216, down 17% since June’s referendum.It’s currently trading at $1.216, down 17% since June’s referendum.
9.22am BST9.22am BST
09:2209:22
Conservative MP Sir Gerald Howarth has warned Unilever not to try to profiteer from the slump in sterling.Conservative MP Sir Gerald Howarth has warned Unilever not to try to profiteer from the slump in sterling.
He said the firms’s reputation would be damaged “if they seek to use the fall in the pound to exploit the consumer”.He said the firms’s reputation would be damaged “if they seek to use the fall in the pound to exploit the consumer”.
(that’s via the Press Association)(that’s via the Press Association)
9.18am BST9.18am BST
09:1809:18
The sight of Pot Noodles, PG Tips teabags and Knoor stock cubes vanishing from Tesco’s shelves could be the moment when the pound’s vicious tumble hits home to the public.The sight of Pot Noodles, PG Tips teabags and Knoor stock cubes vanishing from Tesco’s shelves could be the moment when the pound’s vicious tumble hits home to the public.
Currency expert Kit Juckes, of French bank Societe Generale, says:Currency expert Kit Juckes, of French bank Societe Generale, says:
Yesterday, the implications of the pound’s fall on prices and retailer margins hit home for the wider public as the country’s leading supermarket engaged in a war over prices with its highest-profile supplier of branded goods.Yesterday, the implications of the pound’s fall on prices and retailer margins hit home for the wider public as the country’s leading supermarket engaged in a war over prices with its highest-profile supplier of branded goods.
Either UK consumers will eat store-branded yeast extract, or they’ll pay more for Marmite, or the impact of the pound’s fall will be shared between supplier and retailer.Either UK consumers will eat store-branded yeast extract, or they’ll pay more for Marmite, or the impact of the pound’s fall will be shared between supplier and retailer.
And other Marmite substitutes are available:And other Marmite substitutes are available:
So this is what sovereignty looks like. #Brexit #Marmite pic.twitter.com/6RMajJ8rwoSo this is what sovereignty looks like. #Brexit #Marmite pic.twitter.com/6RMajJ8rwo
9.08am BST
09:08
The Daily Mail has responded to the commercial tensions between Tesco and Unilever with typical restraint:
9.04am BST
09:04
Over in the City, a wave of selling has dragged the FTSE 100 index back below the 7,000 mark.
Mining stocks are leading the rout, following disappointing trade data from China. Chinese exports fell by 10% in September, which implies its economy is slowing faster than hoped -- which translates to less demand for raw materials.
Tesco and Unilever are also pulling the London stock market down, as the Marmite price war alarms investors.
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Neil Wilson of ETX Capital says the City isn’t impressed by the “squabbling” between Tesco and Unilever over price rises.
That’s why both company’s shares are dropping this morning:
Tesco may simply be trying to call Unilever’s bluff over price hikes but markets are not impressed. Unilever market share is an issue as Tesco is by far Britain’s leading retailer, although just how long can people go without Marmite and PG Tips is unclear. Tesco sales could suffer if consumers head to competitors for their favourite brands.
Unilever dropped 2% on the open despite posting better than expected sales – a sign that shareholders are worrying about broader market conditions that chief executive Paul Polman said were ‘weak and volatile’. Tesco was down 2.5% at the start of play.
Sainsbury’s and Morrisons were also lower, reflecting nerves about cost pressures at the big retailers as the slump in sterling hits home. A weaker pound can only mean higher prices for consumers or lower margins for suppliers and retailers, or a combination of all of these.
8.31am BST
08:31
Unilever and Tesco shares slide
Shares in Unilever and Tesco have both fallen this morning.
Tesco has dropped by 2.5%, as traders ponder the financial implications of losing a swath of popular brands from its shelves.
Remarkable bust-up between @Tesco and @Unilever. As of this morning the supermarket has stopped buying all 40-odd of Unilever's UK brands.
Unilever are also in the red, down 2%, despite beating analyst forecasts this morning.
Underlying sales increased of 3.2% in the last quarter, although unfavourable currency movements did hurt sales growth.
Updated
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8.25am BST
08:25
Unilever’s finance chief has defended the company’s attempt to hike prices following the decline in sterling.
Graeme Pitkethly told Reuters that it’s just a normal part of business:
“This is just devaluation-led cost increase, this is just quite normal,”
8.22am BST
08:22
Labour MP Wes Streeting tweets:
If people are worried about losing marmite from Tesco, wait until they find out about jobs...
8.12am BST
08:12
Brexit price war: what the experts say
The price row between Tesco and Unilever is an important moment in the Brexit story, analysts say.
The sight of Unilever’s products vanishing from the shelves of Britain’s largest retailer is “another tangible sign of the power of the weak pound” in a global economy, argues Kathleen Brooks of City Index.
She writes:
Some corners of the press are up in arms about how consumers are being held to ransom by a prominent remain campaigning corporate, however, this is what globalization is: an EU company owns quintessentially British goods such as Marmite.
Overall, this stand off is not good for anyone, least of all Unilever, who could see reputational damage here in the UK, they are also likely to lose market share if its goods are not stocked in Tesco, and we would expect an agreement to be reached by both sides. Tesco is likely to stick to its guns, however, and play hardball with Unilever; only last week its CEO announced a new round of price reductions as part of the turnaround plan for the retail giant.
The row is also a warning sign to consumers that prices are going to be pushed up, Brooks adds:
The Tesco/ Unilever battle is the latest fallout from Brexit, and since the pound dipped further overnight, back below 1.22 after a hawkish tone in the minutes from the Fed’s September meting, price wars are likely to heat up. The supermarkets are likely to try and resist price increases since most of them are trying to cut prices to attract consumers. However, this episode highlights how quickly weakness in the pound can effect us all in the pocket.
Duncan Weldon of Resolution Group agrees that consumers are going to face higher prices in the shops:
Retail margins are too thin to swallow this FX hit. Price rises are coming. But the Tesco/Unilever spat is good brand management for Tesco.
8.03am BST
08:03
Britain, a nation of Marmite stockpilers?
Only two jars of Marmite left this morning. #marmitewatch pic.twitter.com/T8NIHpKpda
Tesco is running out of Marmite and Persil. It's all gone a bit 1970s 'winter of discontent'.
7.49am BST
07:49
Introduction: Pound is back below $1.22
Good morning, and welcome to our rolling coverage of the world economy, the financial markets, the eurozone and business.
There’s no escape from the financial implications of Brexit today.
The pound has started the day on the back foot, dropping by half a cent to $1.216.
That means sterling is close to its all-time lows, on a ‘trade-weighted basis’, as global markets assess Britain’s likely fate out of the EU.
Yesterday, Brexit secretary David Davis sent the pound dipping by hinting that Britain could well exit the single market, even though this would have serious implications for exporters and the financial services business.
But that warning was eclipsed by the news that Tesco and Unilever were coming to (metaphorical) blows in a pricing row apparently triggered by the slump in sterling.
Products including like Marmite, Ben & Jerry’s ice cream, , PG Tips tea, Knorr, Bertolli and Pot Noodles are hit, after Tesco refused to accept Unilever’s demand for a price rise.
They’ve also vanished from the Tesco website, as news of the row hits the front pages:
Tomorrow's Daily Telegraph front page: Brexit price row over Marmite #TomorrowsPapersToday pic.twitter.com/eOx88NjI5b
It’s not quite clear why Marmite should be particularly sensitive to sterling’s troubles – this nectar of the gods is carefully crafted in the Midlands, from leftover piles of brewer’s yeast.
One source told us:
“Unilever is using Brexit as an excuse to raise prices, even on products that are made in the UK.”
But there’s no doubt that raw materials imported into the UK, by Unilever or anyone else, will cost more today.
The pound has shed around 17% against the US dollar since June, which is an unpleasant pill for companies to swallow .
Unilever are actually reporting their financial results today, so we should hear more from them about the issue shortly....
Updated
at 9.58am BST