Brexit fallout spreads to Britain's famous Marmite


London (AFP)

The pound's Brexit-fuelled slump is unsettling food giants, who are facing a squeeze in revenues as higher product prices hit consumers in the pocket.

Britain's biggest retailer Tesco on Thursday stopped sales of top Unilever brands, including the distinctive Marmite spread well known for its "love it or hate it" advertising campaign.

Britain's media seized on the announcement, with the BBC running a live report on #Marmitegate and the front page of the free Metro daily splashing with the headline "Marmite wars".

It also lit up social media.

"Maybe Tesco should have been sourcing their stock from Uni-remainer? Just a thought. #brexit #marmitegate", Sara Robinson tweeted.

Jars of Marmite were "currently not available" in the online store of Tesco, the world's third biggest supermarket chain said after reportedly refusing Unilever's request to hike prices by 10 percent.

Other products made by Dutch group Unilever, including PG Tips teabags and Ben & Jerry's ice cream, were also unavailable through Tesco, but it was the sudden absence of Marmite that prompted a national furore.

Pinar Hosafci, senior food analyst at consultancy Euromonitor International, said Unilever was being hit by the pound's slump, which has tumbled to 31-year lows against the dollar and 7.5-year troughs versus the euro since Britain voted June 23 to exit the European Union.

"Brexit has been a trigger (for Unilever's move) and it is likely that other (food) companies which are reporting in euros, including the likes of Nestle and Ferrero, will follow suit," she said.

Releasing stagnant third-quarter figures Thursday, multinational Unilever acknowledged it was a "tough market" globally.

"But in the UK, which is about 5.0 percent of our global turnover, prices should start to increase to recover higher cost of imported materials from the weaker sterling," chief financial officer Graeme Pitkethly told a conference call.

Unilever refused to comment on its relationship with Tesco, while the supermarket chain said: "We are currently experiencing availability issues on a number of Unilever products. We hope to have this issue resolved soon."

- Rising costs -

Analysts said Tesco, whose chief executive Dave Lewis is a former Unilever executive, would be reluctant to hike prices as it battles fierce competition with German-owned discounters Aldi and Lidl -- and traditional supermarket rivals Asda, Morrisons and Sainsbury's.

"Attentive investors should not be surprised at Unilever's demand that Tesco pay 10 percent more for its products following the devaluation of the pound," Nicholas Hyett, equity analyst at Hargreaves Lansdown stockbrokers, said in a client note.

"Results show that faced with currency devaluation in Latin America, Unilever did just that, with prices up 15.5 percent. Consumers kept buying though, with volumes declining just five percent."

Hyett added: "Tesco may choose to stand its ground on pricing, but history suggests that if other retailers can stomach the increase, consumers will be willing to stump up to get their Unilever fix."

In London deals, Tesco's share price was down 2.19 percent at 196.80 pence, while Unilever shares shed 2.26 percent to 39.81 euros in Amsterdam.

"The flare-up does show that pressures are building in the consumer sphere following the Brexit vote and they are likely to persist," said City Index analyst Ken Odeluga.

"Unilever is legitimately trying to offset some of the revenue declines and input cost rises that are a direct consequence of sterling's collapse over the last few months.

"But Tesco is loath to put a 10-percent jump in Unilever product prices in front of its customers whilst a price war is raging with rivals."

Marmite, a thick dark-coloured salty spread, first hit the shelves more than a century ago from a factory still operating in England.

Made from spent brewer's yeast, Marmite is usually spread on toast although its makers suggest using it as an ingredient for dishes such as bolognese and stir fry.