Round one of the great Marmite bust-up was fun – let’s hope the corporate scrap runs and runs. In round two, Tesco’s CEO, Dave Lewis, could point out that Unilever has grown fat on profit margins on 14.9% and contrast his old employer’s easy life with his own struggle to restore the supermarket chain to more than 2%.
Or he could allege that Unilever’s strongarm tactics aren’t simply currency-inspired but flow from the weaker rate of sales growth revealed in Thursday’s third-quarter trading update. Or that Unilever is already milking the great British shopper to fund lower-returning adventures in the emerging markets of Asia and Latin America.
We will be denied such entertainment, of course, though Lewis should make all those points behind closed doors. This is a commercial negotiation and, in the end, mutual self-interest will prevail. A deal will be done quietly. Tesco shoppers will have to pay more (but probably not 10% more) for their Ben & Jerry’s ice cream, but supplies will be secure.
Yet one has to admire Lewis’s determination to fight to the point where stocks of Marmite and other goods are running low. It would be silly to deny Unilever’s right to try to pass on some of the higher costs from commodities and dollar – and euro-denominated packaging – but an alleged 10% across-the-board price hike does indeed look too much, too soon.
Lewis worked at Unilever for 27 years and will have a keen sense of when his former colleagues have overplayed their hand. Note how Unilever’s finance director squirmed ineffectually as he refused to shed light on the 10% figure. Lewis will know that some level of price increase is inevitable, but a public row – and a little more focus on brand-owners’ post-Brexit price demands – strengthens his negotiating hand. From a tactical point of view, he’s played a blinder in positioning Tesco as a stout defender of UK consumers’ interests.
Yet memories are short. Lewis was hired to rescue Tesco from a crisis caused by his predecessors’ willingness to bleed UK shoppers for years and years to fund their own adventures in the US, China and eastern Europe. Unlike Unilever’s, Tesco’s expansion wasn’t merely lower-returning but a disgraceful waste of resources.
