Unilever and the Tesco brand: How to live with hyperinflation

Unilever, a global favourite, is currently facing headwinds not from hyperinflation, but from those who seek to deny the effects thereof. Today, I woke up to news headlines asserting that Marmite and other Unilever brands will no longer be available in Tesco. Apparently, Unilever is not allowed to increase its prices – notwithstanding the fact that the sterling depreciated by 15% within a month.

This invoked memories from a recent trip to Argentina: At the peak of their currency devaluation when Christina Kirchner attempted price controls. The net result was that Carrefour had rows of empty shelfs where global brands were supposed to be displayed – with only certain aisles that were stocked up with national produce: It was not a pretty scene, for anyone wondering what “de-globalization” will look like. Remember that the UK produces far less in terms of agriculture and has to import much more food than agri giants in Latin America.

Now it is understandable that after TESCO failed to survive in the US and Asia, it may be tempted to view an extreme Brexit government and the rise of excessive nationalism as the ideal circumstances to take a last stand against more successful global players such as Lidl, Aldi & Carrefour… however in a low margin industry, it is impossible to adopt an Argentine approach and to impose price freezes. Unilever has a reputation for being sensible with pricing and can be trusted to behave in a reasonable way – as a global brand would do, so if anything, now is the time for loyal supporters of the brand to be heard. Naturally, this will lead to a stock market crash for TESCO, since investors are more likely to back Unilever and put pressure on Tesco and Dave Lewis who are bullying suppliers and running for cover from German businesses who treat suppliers better, but that is another story.

The way in which Theresa May is stoking the flames of nationalism is not different to how CFK behaved in Argentina – we know how it ended. The pound sterling is already starting to behave like the Peso: volatile and unpredictable. So for as long as we’re left with an unelected Brexit nationalist government, the question is: How long can businesses avoid facing the same fate as those that crumbled under self-imposed price controls in Latin America?

Original article https://www.linkedin.com/pulse/unilever-brand-tesco-hyperinflation-adriaan-brits