Friday 14 October 2016 6:00 am

Marmitegate is the “thin end of the wedge” for the retail industry

Tesco and Unilever's public price war is the "thin edge of the wedge" for the retail sector after the Brexit vote, analysts have said, as the prospect of higher import costs and job losses weigh on the industry.

Unilever has used the fall of sterling after the Brexit vote as a basis for increasing its prices for supermarkets by 10 per cent, but Tesco has refused to take the hit, meaning Unilever's products are slowly disappearing from the shelves of Britain's biggest supermarket.

Laith Khalaf, senior analyst at Hargreaves Lansdown said: "This pricing spat is likely to be the thin end of the wedge when it comes to relationships between UK retailers and their suppliers, in light of the pressures now applied by weaker sterling.

"The dark side of a weaker currency is that it leads to more expensive imports, and hence rising inflation."

Data collected for City AM by website mySupermarket shows that, despite Tesco's insistence on keeping low prices, the price of a sample of Unilever products has increased more at Tesco than at any of the other Big Four supermarkets since the month of the EU referendum.

The basket of 38 Unilever products, including Marmite and Persil, has increased in price by eight per cent at Tesco between June and October. At Sainsbury's, the price has gone up six per cent. In Asda and Morrisons, the price fell by two per cent and 0.8 per cent respectively.

"Products produced in the eurozone are now nearly 20 per cent more expensive and these two majors may well begin negotiations on behalf of the industry to determine an appropriate level of price increase across the board," said Gary Hobbs, senior equity analyst at Investec Wealth & Investment.

"The Big Four retailers typically have one or two weeks of stock so expect availability to fall if a compromise is not reached soon."

Retail analyst Richard Hyman said that retailers won't be able to pass on the cost of higher goods to consumers because of the intense price competition between retailers; the effect of sterling would be felt in job losses in the retail sector instead.

Andrew Wood, analyst at Bernstein, said the stand off between Tesco and Unilever could be damaging for the supermarket.

"If consumers go to Tesco and cannot find the brand they want or love, then they may decide to go to Sainsbury's or Morrisons in their next shopping trip," Wood said. "And, of course, when the consumer goes to the other store, they will buy more than that brand."

"It may take a few weeks, but it could lead to share losses by Tesco, assuming the other retailers continue to stock the brand."

Hyman said the problem for Tesco is that Marmite "has incredibly loyal followers and they won't eat a Marmite look alike and they won't do without it."