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More Brexit price rises for UK shoppers

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Niamh Michail

By Niamh Michail+

07-Nov-2016
Last updated on 07-Nov-2016 at 14:41 GMT2016-11-07T14:41:55Z

© iStock/ljubaphoto
© iStock/ljubaphoto

Nomad and PepsiCo will raise the prices of some products in the UK citing Brexit-induced currency changes.

Well-known brands such as PepsiCo's Walkers crisps and Nomad's Birds Eye fish fingers will be affected.

A statement from PepsiCo said: “Fluctuating foreign exchange rates, supply pressure on key ingredients and the weakened value of the pound are impacting the import cost of some of our materials and affecting the price of material costs based on commodities that are traded in foreign currencies.”

© Bloomberg

Since the UK voted to leave the EU in the June referendum, the value of the pound sterling has fallen to its lowest level against the US dollar since 1985 and dropped 14.5% against the euro.

A spokesperson for Walkers told the Press Association the price of a standard 32 g bag of crisps would rise from 50 pence (€0.56) to 55 pence (€0.62).

Although Walkers uses British potatoes to make its crisps at its UK production sites, the company said it imports other ingredients such as seasonings, frying oil and packaging, which it buys in foreign currencies.

Nomad, which owns the Birds Eye brand known in the UK for its fish fingers and chicken nuggets, said the price increases could be up to 12%.

Managing director at Birds Eye UK and Ireland Wayne Hudson said: “Many of our raw materials are priced in dollars and the fall in the value of the pound since the EU referendum has meant that our costs in sterling have risen.

“Our first priority is always to the people who buy our brands and we are working to try and absorb these costs as much as possible.”

It said it was also looking into reducing the pack size of its products, which could mean cutting the number of fish fingers in a pack from 12 to 10.

The impact of price rises such as these remains to be seen but some believe it could drive shoppers to opt for private label products or hard discounters.

Shore Capital analyst Clive Black told our sister publication FoodManufacture: "If double-digit price rises highlighted in the trade press from Birds Eye, PepsiCo (Walkers) and Unilever (Marmite) were to be the norm, then expect a major negative consumer reaction. [It] will probably lead to trading down, a switch to private label and a strengthening of the discounters." 

Marmitegate spreads

Last month Anglo-Dutch giant Unilever announced it would be raising the price of certain products  such as its Marmite brand by about 10%.

Britain’s biggest retailer Tesco swiftly said it would neither shoulder the costs nor pass them onto consumers, resulting in dwindling online stocks of some products.

The two companies have since resolved the supply issue but analysts saw it as a victory for Tesco, which was portrayed by mainstream media outlets as fighting to keep food prices down for consumers. 

Like ‘Marmitegate’, it will be up to retailers whether they pass these latest price hikes onto consumers. 

"Since we do not set the retail price of our products, it will be for individual retailers to determine the impact on the price at which they sell our products," said Walkers.

But some say manufacturers are exploiting the situation since the UK decided to quit the EU.

James Russell is wholesale managing director at Blakemore, which runs a number of Spar stores.

He told trade magazine Retail Newsagent: "Brexit has caused uncertainty and I think this is massively opportunistic by PepsiCo considering the current performance of the category and the fact they've taken weight out of the bags not so long ago."

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