Unilever versus Tesco: who should bear the cost of the falling pound - manufacturer, retailer or consumer?

A dispute between Unilever and Tesco has seen household brands such as Marmite and Pot Noodle removed from the retailer's online shop, but this issue extends beyond two mega-brands and the grocery market in general.

Marmite: Poster boy of the Unilever vs Tesco spat (image from @Marmite on Twitter)
Marmite: Poster boy of the Unilever vs Tesco spat (image from @Marmite on Twitter)
It is about who should bear the burden of higher costs because of sterling’s weakness; should it be the manufacturer, the retailer or the consumer?

It’s reported that a "grocer insider" has said this Unilever is using the falling pound as a smokescreen to raise prices. 

However, even products made in the UK will most likely face the pressures of currency instability because they may use ‘ingredients’, equipment or expertise that has to be bought from overseas. 

If a price rise affecting consumers is unaffordable, how should brands communicate this to the public?

First, if an increase seems inevitable, brands should put their communications strategy on an offensive footing. 

The best route to maintain custom in the face of rising prices is to build brand loyalty. 

Businesses should start this work immediately, strengthening the emotive connection between the brand and consumer, improving packaging and heavily promoting reasons for purchase beyond cost and securing third-party endorsements from influencers, like celebrities.

If a brand increases its sales price, then it needs to be wary of competition from own-brand and independent businesses. 

Building brand loyalty is obviously a way to counter this, but a more dramatic solution may be to release diffusion lines as well. 

This may mean producing an inferior product, but with the right branding this could mean reaching new consumers and opening the door to new retailers.

If the price rise is to be well received by consumers, building understanding will be crucial. 

Social media is a powerful forum for this as a brand can have total control of the narrative on its own accounts. Video content can be used to explain complex scenarios with talking heads a powerful way to build trust.

Nonetheless, all brands must be extremely sensitive on the subject of Brexit. A huge proportion of the population voted to leave the EU and will not be receptive to hearing that they are to blame for inflation. 

The wider economy should also learn lessons from the energy industry. If a price rise is due to a temporary scenario, then consumers will expect prices to fall when the situation normalises. 

The best approach will be to keep an open dialogue with the middlemen – those that sell the product direct to consumers. 

They will be as reluctant as brands to avoid price-hikes, so a solution could be reached.

Brands should also avoid knee-jerk decisions. Sterling’s volatility is largely down to whether the UK will have a ‘soft’ or ‘hard’ Brexit. 

This question may be shortly resolved as MPs are soon to debate how negotiations will proceed with the EU, so there is a possibility that the situation will normalise in the near future.

Liam Keogh is founding director at Palm PR

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