Sunday Retail News Roundup
Spark of Marmite meltdown, Retailers prices hike, Food bills to soar, Amazon lock picks thief's dream, Weak pound caution hits high street takeovers, Hamleys looks east, After Marmite bitter taste of price rises.
Marmitegate was given only a passing mention in Gina Boswell’s speech at Leeds Beckett University on Thursday evening. Boswell, head of the consumer goods giant Unilever UK and Ireland, visited to deliver a talk about sustainable living. Halfway through, she alluded to and joked that Unilever’s pricing standoff with Tesco had boosted public awareness of its brands. The audience went away with the impression she had taken a peripheral part in the latest Brexit drama, which saw Britain’s biggest supermarket temporarily run out of products online after falling out with Unilever. In fact, the American executive played a starring role. Buyers asked to go through Unilever’s portfolio, looking at ingredients for each product and price rises that might be appropriate. Marmite, made in Staffordshire, using slurried yeast, a cheap by-product of beer production, is hardly an exotic, dollar-sensitive import. Boswell and colleagues refused to go through the list in detail. They quickly collapsed when they tried to justify it and just said, It’s a blanket 10%. If you don’t accept it by mid-October, we’ll stop supplying you. Tesco, which has been described by Sainsbury’s boss Mike Coupe as the 800lb gorilla of the checkouts, gave Unilever short shrift. Jason Tarry, chief commercial officer, said no to the price rise. After Unilever cut off Tesco’s supply, Tarry and chief executive, Dave Lewis, de-listed the company’s entire product range from tesco.com. Tesco later presented it as a measure to stop stocks running out in stores. The online blackout also looked like a way of making the fight public.
Mail on Sunday.
Retailers are poised to impose a wave of price rises that could add 5 per cent to shopping bills in the new year after the pound plunged by more than the worst forecast of Project Fear. The hikes, expected to hit soon after Christmas, will cost consumers an estimated £15billion next year. A slew of executives from supermarkets, fashion retailers and suppliers have issued warnings. Most declined to be named, saying the issue has become too political, but all predicted price rises of at least 5 per cent.
British shoppers are faced with price hikes on groceries adding up to as much as £8 billion over the next 12 months as a result of the pound tumbling in value against other currencies following the Brexit vote. That means individual households could have to spend £300 more a year in supermarkets. Directly imported goods will be worst hit, such as wine, meat and chicken, seasonal fruit which is often imported from Europe, Africa or the Middle East and specialist products from Europe. Among the worst affected are parmesan cheese, expected to go up by 15 per cent, while the price of both olive oil and coffee will soar by 20 per cent, as will sugar. Wine and chocolate are both set to rise by five per cent. More than half the products sold in UK stores are imported, so the 16 per cent drop in the value of the pound this year will hit retailers with direct cost rises of at least eight per cent. Shoppers will inevitably face price rises on virtually all goods. Imported items will cost more, but so will things manufactured in the UK, thanks to the rising price of commodities such as petrol and raw ingredients. A five per cent rise across the entire £300 billion retail industry would mean shoppers will be faced with a £15 billion rise in bills. Tesco say the Unilever dispute is now resolved, although last night many items had yet to be restored to the shelves.
Thieves’ tools like lock picks and devices to help break into cars are being openly sold by internet giant Amazon for as little as £2. While they are not technically illegal, the Master Locksmiths Association (MLA) last night described them as a burglar’s dream. Police chiefs also expressed concern over the availability of the devices, some of which are disguised as pens to evade searches. A spokesman for the National Police Chiefs’ Council said It’s a concern for police that these tools can be purchased online. Amazon refused to comment on the items but a spokesman indicated they would remain on sale.
The weak pound has become an obstacle to high-street takeovers, with JD Sports among those hit by complications caused by the rising cost of imports. Retailers are facing significantly higher import costs and the threat of duty tariffs, which deal-makers say has made their negotiations more difficult. JD Sports in talks to buy Go Outdoors since before the EU Referendum vote in June. However, the deal that would cement its status as the UK’s biggest sportswear retailer, have stalled several times due to tense negotiations over price. Go Outdoors, partly owned by private equity firm 3i, has attempted to squeeze a higher price out of JD Sports, causing a Mexican stand-off. However, while the deal has taken longer than first thought, the conversation is still going on. It is thought that if a takeover can be agreed it could value the tent, waterproof and cycle retailer at around £130m. The tumble in the value of sterling has also delayed sale plans for one of the country’s biggest discount retailers, The Original Factory Shop (TOFS), until next year. Owned by private equity firm Duke Street Capital since 2007 and has more than 200 stores across the country. Rothschild was appointed in June to explore the TOFS’s options and last month the company hired former Matalan boss Alistair McGeorge as its new chairman, a move experts saw as a sign of an imminent change of owner. However, bankers said the process had been very quiet and highlighted the company’s profits will be under pressure from a hefty increase in import costs because most products are made overseas. The British Retail Consortium has warned that shop prices will have to rise as retailers struggle to absorb an increase in costs. Next has already said it may have to raise prices by up to 5pc next year. Mountain Warehouse warned that it would have to raise prices for the first time in five years to cover higher costs and it was shelving flotation plans.
Hamleys' profits shrank last year after the toy retailer’s new Chinese owners spent close to £1m on fees during their takeover of the business. Chinese footwear retailer C.Banner International swooped on the 226-year-old company, best known for its seven-storey flagship store on London’s Regent Street, in a £100m deal last October. Recently filed accounts for Hamleys reveal pre-tax profits tumbled from £1.7m to £761,000 last year while sales fell from £68m to £56.6m. C.Banner’s chairman, Chen Yixi, thought to have family links to the billionaire behind Sanpower, Yuan Yafei, who bought an 89pc stake House of Fraser in 2014. Earlier this year the two Chinese retailers were said to be discussing swapping shares in Hamleys and House of Fraser but as yet the pair have only reached an agreement about toy concessions in department stores.
Flicking through the chunky Argos catalogue gives a snapshot of how much British high street retailers rely on imports and are vulnerable to the slumping pound. Beats headphones at £89.95 come via California, a slim PlayStation 4 is made in China, curved Samsung TVs are manufactured in South Korea. It is these imports, from clothes manufactured in south-east Asia to consumer electronics, that are expected to go up in price in the new year on the back of fluctuations in the post-EU referendum pound. The very public row between Tesco and Unilever last week over the wholesale cost of household staples such as Marmite is the first public illustration of the sensitivity of everyday items to movements in sterling, which closed the week at just under $1.22. Consumers have been now been warned that spikes in prices on high-street goods could come after the Christmas sales, as retailers’ hedges against currency fluctuations, a form of insurance policy against movements in the pound, come to an end.
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