Marmite Wars – A taste of disputes to come?
Last week we witnessed the first public stand-off between two retail giants, resulting from the threat of Brexit induced inflation and Tesco not accepting Unilever's proposed price increase. One of the big fall-outs from the decision to leave the EU, fuelling the volatility in markets, is the shifting in supplier-retailer relationships and negotiations. These have enjoyed years of predictability and relative stability – the retailer argues for fair prices and the supplier challenges for price increases.
The way the dispute between Unilever and Tesco has been resolved could set a pattern for other retailers and suppliers who have been feeling the tension caused by price rises in commodities and materials and the weakening of UK currency. Both sides of the supplier-retailer argument are experiencing challenges from the pressures of the falling value of the pound, together with a constant balancing act between rising costs and trying to stay competitive.
By delisting some of UK consumers' favourite brands, Tesco risked the company losing market share, as their competitors tried to plug the gap. Asda, for example, was reported to have cut prices on Marmite in the wake of the dispute. It is significant that Tesco has been praised in some areas of the media as a post Brexit 'consumer's champion' in this argument – a material turnaround from the negative press in the last few years following the overstating profits scandal.
Significantly, it could be that the discounters in the sector, who have already driven significant changes to the way customers buy groceries in the UK, may gain further advantage and even greater market share, since they don't typically rely on branded goods in the same way as supermarkets.
The latest Consumer Tracker from Deloitte, based on a survey in September, shows that UK confidence is actually at a five year high (outside London). It will therefore be interesting to see how the increasing price rises, and continued fluctuations in the value of the pound, will affect consumer spending in the months ahead. For the moment, at least, consumers will likely retain brand loyalty.
The future is uncertain but it may be that as the market situation fluctuates and uncertainty over Brexit persists, we could see a rise in supplier versus retailer disputes.
However, while the likelihood is that prices are going to rise as the pound falls, at least retailers can be empowered by Tesco's apparent success to push back against unsubstantiated global price hikes from suppliers.
For more information please contact Bill Duncan, Associate, Commercial & Regulatory Disputes team.