Unilever’s finance chief has admitted that the prices of its popular products will rise as a result of the collapse in sterling, a day after the firm was accused of “exploiting consumers” following a row with Tesco.
Speaking alongside the group’s third quarter results, chief financial officer Graeme Pitkethly said: “In the UK, which accounts for 5% of turnover, prices should start to increase to cover the cost of imported goods due to weaker sterling.”
However, he added that he is confident that the dispute with Tesco will be “resolved very quickly” and said that other Unilever customers have accepted price hikes.
Screengrab of the Tesco website showing Marmite unavailable
The group, behind brands such as Marmite, Flora and Persil, is believed to have demanded a 10% price rise due to the falling value of sterling, halting deliveries to Tesco when it refused.
Since the EU referendum on June 23, the pound has lost nearly 18% of its value against the dollar.
The stand-off has left the supermarket facing a shortage of brands such as Surf washing powder, Comfort fabric conditioner, Hellmann’s mayonnaise, Pot Noodle and Ben & Jerry’s Ice Cream.
Mr Pitkethly’s comments came as Unilever reported a rise in sales in the third quarter, helped by price increases.
The firm said underlying sales rose 3.2% in the period, with total sales coming in at 13.4 billion euro. However, the firm added that it took a hit from currency movements.
E arlier this year, the firm posted profits of around £2 billion for the first half of 2016.
Chief executive Paul Polman warned in June that a vote to leave the EU’s single market would increase prices for consumers.
He said that a vote to Leave would mean hikes in import duties on items such as dairy products, leading to price rises that would affect consumers.
But MPs condemned Unilever, saying the company was using Brexit as an excuse to exploit consumers, and warned it may be damaging its brand.
Conservative MP Sir Gerald Howarth said it will be very damaging to the firm’s reputation “if they seek to use the fall in the pound to exploit the consumer”.
Shares in both companies took a hit as a result of the spat. Tesco shares were down 1.96% and Unilever was down 2.46% in morning trading.
Tesco declined to comment further, reiterating its statement late yesterday, saying it hopes to “have this issue resolved soon”.
It is understood Unilever is in active discussions over price rises with the other major supermarket chains, b ut Tesco’s fellow Big Four grocers declined to comment.
The Co-Operative also said it does not “talk openly around discussions with any supplier”.
Discounter Lidl added: ” Whilst we do not discuss buying prices, we can always assure our customers that we will offer them the best quality products at the lowest retail prices.”
Downing Street refused to get drawn into the row.
Prime Minister Theresa May’s official spokeswoman said: “It’s a decision for companies how they market and sell their products.”
Eamon O’Hearn, the GMB union’s national officer for the food industry, said: “It’s very common for suppliers and retailers to renegotiate supply contracts but super-rich companies like Unilever must not be allowed to exploit the Government’s chaotic handling of Brexit as an excuse for making workers and shoppers pay the price.
“We will vigorously defend our members in the event that wealthy companies like Unilever seek to recoup increased costs through cuts to terms and conditions.
“GMB members will be concerned about the effects of this messy negotiation. Whether it’s a major cut to their pay packets or more expensive food in the shops – we will continue to ensure our members do not feel the brunt of opportunistic employers who seek to exploit the current political climate.”
Labour MP Stephen Kinnock, of the Open Britain campaign, said: “When the plunging pound stops you from getting PG Tips and Marmite in the supermarket, you’re truly starting to feel the first tremors of Brexit.
“David Davis’s claims that there were no downsides to Brexit are colliding with economic reality. The best thing the Government can do for economic confidence and the pound is to commit now to starting the upcoming negotiations on the basis of securing full and unrestricted access to the single market.”
Shadow business secretary Clive Lewis said: “Once again the public are paying the price for Tory failure to make any contingency plans for Brexit.
“This is unlikely to stop at a Marmite shortage – more and more retailers are going to be squeezed by higher import prices in the coming months, as hedging contracts end and the cheaper pound starts to squeeze margins.”
The move is understood to have hit online sales rather than products in Tesco stores
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