Unilever products to rise in price due to slump in sterling, says finance boss

Unilever's finance chief has said that the price of Marmite and other products will rise as a result of the collapse in sterling, with experts warning that consumers could have to stomach more pain in the New Year.

Speaking alongside the group's third quarter results, chief financial officer Graeme Pitkethly said: "In the UK, which accounts for 5% of turnover, prices should start to increase to cover the cost of imported goods due to weaker sterling."

However, he added that he is confident that a dispute with Tesco will be "resolved very quickly" and said that other Unilever customers have accepted price hikes.

The group, which is also behind brands such as Flora and Persil, is believed to have demanded a 10% price rise due to the falling value of sterling, halting deliveries to Tesco when it refused.

Since the EU referendum on June 23, the pound has lost around 18% of its value against the dollar, resulting in higher costs for retailers.

The stand-off has left the supermarket facing a shortage of brands such as Surf washing powder, Comfort fabric conditioner, Hellmann's mayonnaise, Pot Noodle and Ben & Jerry's Ice Cream.

Steven Dresser, retail analyst at Grocery Insight, said there was likely to be a round of price hikes in January as retailers look to pass on higher costs once the festive season is out the way.

"No one wants to put prices up ahead of Christmas. Others may just wait until January."

"It's only going to get more painful," he cautioned.

Mr Dresser added that the Tesco row over prices with Unilever was a "pre-cursor" to other moves by suppliers to put up the costs of their products.

Laith Khalaf, senior analyst at Hargreaves Lansdown, said the pricing spat was likely to be the "thin end of the wedge".

"This kind of friction is an inevitable result of the unstoppable force of higher import costs hitting the immovable object of UK retail pricing," he added.

The price hikes helped Unilever report a rise in sales in the third quarter, with the firm saying underlying sales rose 3.2% in the period, with total sales coming in at 13.4 billion euro. However, Unilever added that it took a hit from currency movements.

Earlier this year, the firm posted profits of around £2 billion for the first half of 2016.

Chief executive Paul Polman warned in June that a vote to leave the EU's single market would increase prices for consumers.

But MPs condemned Unilever, saying the company was using Brexit as an excuse to exploit consumers, and warned it may be damaging its brand.

Conservative MP Sir Gerald Howarth said it will be very damaging to the firm's reputation "if they seek to use the fall in the pound to exploit the consumer".

Shares in both companies took a hit as a result of the spat. Tesco shares were down 2.73% and Unilever was down 4.26% in afternoon trading.

Tesco declined to comment further on the matter, reiterating its statement on Wednesday, saying it hopes to "have this issue resolved soon".

It is understood Unilever is in active discussions over price rises with the other major supermarket chains, but Tesco's fellow Big Four grocers declined to comment.

The Co-Operative also said it does not "talk openly around discussions with any supplier".

Discounter Lidl added: "Whilst we do not discuss buying prices, we can always assure our customers that we will offer them the best quality products at the lowest retail prices."

Downing Street also refused to get drawn into the row.

Prime Minister Theresa May's official spokeswoman said: "It's a decision for companies how they market and sell their products."

Eamon O'Hearn, the GMB union's national officer for the food industry, said: "It's very common for suppliers and retailers to renegotiate supply contracts but super-rich companies like Unilever must not be allowed to exploit the Government's chaotic handling of Brexit as an excuse for making workers and shoppers pay the price."

Labour MP Stephen Kinnock, of the Open Britain campaign, said: "When the plunging pound stops you from getting PG Tips and Marmite in the supermarket, you're truly starting to feel the first tremors of Brexit."