Reports are widespread today that Marmite supplies to Tesco are at risk. The reason is that its manufacturer, Unilever, wants to impose price rises of up to 10 percent. It is partly blaming the movement in the pound in the last couple of weeks or so. Tescos is resisting, pointing out that many Unilver products are made in the UK and so the currency movement should not have had much impact.
But that's not true for Unilver. It accounts in euros. So every sale made in pounds is a loss to it. It's not, as far as it is cncerned, making money on Marmite now and it's fighting back in the way it thinks best.
The Unilver situation is odd, but let's be clear that it is only a taste - and for some a deeply unpalatable one - of what is to come. The pound cannot crash more than 10% without a serious inflationary impact. That is economic reality at a time when we import more than we export. Prices on many products are going to rise, and soon. And there will be no countervailg immediate trend from exporters doing well: they will not be rushing to put the gains into people's pockets. The impact of this currency shift will be unbalanced.
Nor can we presume that the impact will be limited or short lived. There is little prospect of either being true: no one can turn round and say Brexit was all just a bad dream and this will go away: that is not going to happen. So the pressure in the pound will continue; the lack of investment will continue; the outflow of funds will continue; the concern about the UK's trade balance will continue and so too will the lack of confidce in the UK's negotiating position continue.
The hard impacts of Brexit will be apparent to people well before Christmas, and as a result long before Article 50 is triggered.
What can be done about it?
The worst thing would be that interest rates are also increased to counter the inflationary trend: this would impose a second burden on just managing UK households.
The best thing would be the creation of UK employment opportunities with a deliberate focus on pushing up UK wage rates: a Green New Deal has by far the best chance of doing that by creating local jobs in every UK constituency.
A third option would be to cut VAT for a year whilst the inflation works through the system. There is a cost: the QE programme could cover it. We are after all running a government surplus this year after QE is taken to account (debt in the hands of third parties will be lower at the end of this financial year than at the start: that is a surplus).
A fourth option is to increase the minimum wage. This protects the vulnerable.
But to say we need to think unconventionally in these quite radical ways to deal with the crisis we are facing is to understate the scale of the issue. Brexit will be more than a Marmite test by the time that the impact of these ongoing falls in the value of the pound hit the economy: it will be a subject of universal loathing.
The government may want to take note.
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“The government may want to take note.”
I’m not sure you’re right about that. They might be dragged, kicking and screaming, to that conclusion, but for me there’s a clear lack of the proper will.
Whilst the impact of Brexit might be driving this particular issue, is there also the issue that the cost of “well-known” brands is considerably more than “in-house” or less well-known brands. Supermarkets such as Aldi, Lidl etc. have lower prices because they often sell less well-known brands. The premium that companies such as Unilever place on their products is hindering Tesco’s ability to compete ?.
I am not a fan of Tesco Marmite, I must admit
But I accept the point
Always supposing that this government does not have an underlying reason for exit that they are keeping quiet about…………
“Why of course the people don’t want war. Why should some poor slob on a farm want to risk his life in a war when the best he can get out of it is to come back to his farm in one piece? Naturally the common people don’t want war: neither in Russia, nor in England, nor for that matter in Germany. That is understood. But after all it is the leaders of a country who determine the policy and it is always a simple matter to drag the people along, whether it is a democracy or fascist dictorship, or a parliament or a communist dictatorship. Voice or no voice, the people can always be brought to the bidding of the leaders. That is easy. All you have to do is tell them they are being attacked, and denounce the peace makers for lack of patriotism and exposing the country to danger. It works the same in any country.”
Is that why that charlatan Johnson is now saying we should intervene in Syria? Nothing like a bit of military action with ‘our boys’ involved to distract the population from the disaster of Brexit and continuing austerity, eh?
And anyone who opposes this, or points out that such an action is a distraction from said Brexit disaster will be shrilly denounced as ‘unpatriotic’ or, even more disgracefully, as a ‘traitor’.
This is not to excuse the Brexit factor, the £ crashing, the political uncertainty and the Tories being the Tories.
However my other half negotiates trading deals for Boots and when she heard the news she said “Oh Unilever pull this nonsense every year” – so while there will almost certainly be massive future price rise implications because of this ludicrous vote, it sounds like Unilever would probably have used “the strong pound” “unseasonable rain” “bit nippy outside” or any other excuse they could think of to try and raise prices 10% this year anyway.
Fascinating post. This ‘Marmite crisis’ seems to be a portent for the post BREXIT world. But I still wonder if people will get it? There is always someone or something else to blame these days – especially by the unscrupulous and manipulative Tories.
Marmite is made in Burton-on-Trent – time for it to become a workers co-operative and get Unilever off its back. Unilever owns almost everything you touch in a supermarket. perhaps breaking up these monopolies would be a good start.
main ingredient in Marmite: Barley -uk produced 7.5 million tonnes of it last year.
Barley? I thought that the main ingredient of Marmite was yeast extract?
So did I….
Although the yeast extract would not exist without the barley malt to brew with the yeast
Sorry, you are right of course, it is yeast extract but as Richard said the barley is integral to it in some way.
I think I’ll keep my latest jar unopened in case it becomes an alternative currency and an asset bubble develops.
interesting to note that Unilever has its HQ in Rotterdam and is a ‘dual-listed ‘ Company:
“A dual-listed company or DLC is a corporate structure in which two corporations function as a single operating business through a legal equalization agreement, but retain separate legal identities and stock exchange listings. Virtually all DLCs are cross-border, and have tax advantages for the corporations and their stockholders.”
Richard- I suspect you have written about ‘dual listing’-can’t seem to find anything on this site about it.
Actually, I can’t think I have….
The pound has turned it’s going up slightly. I think this reflects the tide turning with the prime-minister starting to be seen as Theresa Mayhem who come-what-March won’t be making an offer to the British people they can’t refuse!
Perhaps we should be grateful to Unilever for bringing home to people that a collapsing currency really does mean rising prices, for a country that imports so much. The government and the Brexiteers are still pretending that somehow we won’t feel a thing and hoping that if prices creep up gradually, people wouldn’t notice.
Perhaps we need BMW, Mercedes, VW, Renault et al to announce significant car price increases rather than dribble them in. Bringing home the negative impacts of Brexit. The more negative messages that the public sees soon, the more pressure it puts on the government
Unilever also demanded an increase in price of between 10% and 19% in the Republic of Ireland which means their reasoning has no basis in fact.
That does rather blow the case apart!