Tesco/Unilever: The Post-Brexit Landscape

Tesco/Unilever dispute outlines the post-Brexit landscape for retailers and consumers, says Crimson & Co

The Tesco/Unilever price dispute is arguably the first real example of uncertainty to hit UK consumers post-Brexit, according to Duncan Boyd, manager at global supply chain consultancy Crimson & Co, who states we are now starting to see who the real winners and losers are following the decision to leave the EU.

Last week the supermarket giant and the UK's largest food manufacturer were locked in a battle over an increase to wholesale prices of 10 per cent to compensate for the steep drop in the value of the pound. This led to concerns that consumers would be denied access to household favourites such as Hellman’s Mayonnaise, Marmite and PG Tips teabags.

While the stand-off was resolved quickly, Boyd suggests that the reality of Brexit will inevitably lead to rising costs, which both retailers and consumers will need to absorb:

“The pound slumping against the dollar was the first real example of the post-Brexit reality, as Tesco and Unilever came to loggerheads about a potential increase to wholesale prices. While the two businesses did well to resolve the issue quickly, the reality of the situation is we can expect to see more of these clashes in the future.

“Firstly, price increases over the next few months are inevitable – the UK consumer has been in a fortunate position where for the past five years’ prices have stayed fairly flat and inflation has been running at below the Bank of England targets. It could be argued that we are due an increase to our cost of living and the post-Brexit climate will only spur this on.

“Amongst retailers, while Tesco and Unilever were able to resolve their differences some might not be so lucky, so we’ll likely see a greater proportion re-evaluate their supplier relationships. This might provide greater opportunities for British suppliers, as stores and manufacturers look locally for their produce. The British farming industry could be one example of a benefiter, as retailers look to offset rising import costs.”

Boyd continued: “Much like the consumer, the supermarkets too will need to absorb costs, so they will need to be clever when it comes to protecting their margins. In action this might lead to an increase in promotions and other offers being run in stores that give the impression of lower costs or greater value. Over the past few years, there has been a gradual shift towards price matching promotions rather than volume deals such as buy-two-get-one-free. However, it is only a matter of time before prices have to rise and retailers and their suppliers will have to evaluate their promotional strategies.

“The reality is these are the consequences the UK is going to have to face as we move along the road towards Brexit. Compromise will be critical, not just amongst industry titans of retail and manufacturing, but for us as consumers too.”