On the Unilever, Tesco, Marmite matter.
One of these extracts was written by a trained and experienced accountant. The other was not.
Reports are widespread today that Marmite supplies to Tesco are at risk. The reason is that its manufacturer, Unilever, wants to impose price rises of up to 10 percent. It is partly blaming the movement in the pound in the last couple of weeks or so. Tescos is resisting, pointing out that many Unilver products are made in the UK and so the currency movement should not have had much impact.
But that’s not true for Unilver. It accounts in euros. So every sale made in pounds is a loss to it. It’s not, as far as it is cncerned, making money on Marmite now and it’s fighting back in the way it thinks best.
Which is fine–making a profit is the aim and purpose of being in business and if they’ve the market power to be able to do it then they should. Doesn’t mean that we have to put up with it of course. And we can also do a little calculation to see whether they are being reasonable. Net margins are around 15% for the group. The pound has fallen 20% odd. Their costs, revenues and margins are all static in sterling terms. So, the loss to their bottom line (ignoring the small exports of Marmite) on Marmite is 0.15 x 0.20 of their Marmite sales. Or, their profits on Marmite have fallen by 1.5%. On the back of which they want to push through a 10% price rise?
Who had the accountancy training and has the experience?