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Marmite Was Just The Beginning: Retailers Warn Of Looming Brexit Battle

Food and drink companies are warning consumers to expect the cost of shopping to increase because the low pound has made the cost of some ingredients rocket.

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The row over the price of Marmite was just the beginning of a debate about how much Brexit will impact the cost of food, companies have warned.

The chairman of the British Retail Consortium (BRC), Richard Baker, warned yesterday that supermarkets will not be able to absorb the knock-on effects of the fall in the value of the pound and that prices are likely to increase in the first half of next year.

"Potential impacts [of the EU referendum] have not yet had time to filter through into sales," he said.

The BRC issued its warning after Tesco removed a range of Unilever products, including Marmite, PG Tips, and Dove, from its website after reportedly refusing to accept a 10% increase in the cost of the products.

The shortages were short-lived, however – Tesco and Unilever reached a secret deal on Thursday night.

But other suppliers who spoke to BuzzFeed News on condition of anonymity said the Brexit vote meant it was only a matter of time before they will need to have a similar conversation about raising prices.

British food manufacturers that make products for the domestic market said their businesses had "taken a hit" after people voted for the UK to leave the EU, since when the pound has fallen 20% against the dollar and 22% against the euro.

They warned that #MarmiteGate was the beginning of what could be a new reality – that some food prices could rise as a result of sterling's devaluation, meaning imports of ingredients and packaging would be more expensive.

One small food manufacturer that sells products in thousands of stores in the UK said two-thirds of its ingredient suppliers had raised their prices since June.

The company's founder, who did not want to be identified, said it was absorbing that increase and had been able to balance out any losses with increased export sales. This is because the products have become more affordable for overseas retailers due to the weaker pound.

But, he said, the long-term reality is that UK-based manufacturers will be faced with two options if the pound does not recover: either to "take the hit and start looking to reduce portion sizes" while keeping the price the same, "or pass on the price increase. It's not scaremongering."

He said: "The reality is that costs are increasing for every supplier. Right now, every supplier is having a debate about what to do."

BRC chairman Baker warned that shoppers should expect prices to rise in the first half of 2017 once Article 50 – the formal process of leaving the EU – has been triggered, though he did not anticipate by how much.

The body has called on the government to secure a strong Brexit deal for the UK over fears that exiting the EU could mean retailers being subject to far higher import duties on products from overseas.

It added in a statement: "Everyone in the supply chain will need to play their part in maintaining low prices for consumers," and said "retailers were "on side" with shoppers in seeking to keep prices low.

Another producer told BuzzFeed News that a supplier had raised the price of one key ingredient by 18%. "That kind of movement is relatively huge," he said. "And that will be affecting all food and drink brands."

He said "most suppliers are being squeezed anyway" by major supermarkets negotiating the lowest prices possible, and if suppliers are hit with continued price rises, "they have to be passed on" to the shopper.

"Food suppliers cannot be squeezed from both ends forever," he said.

Sara Spary is a consumer business correspondent for BuzzFeed News and is based in London.

Contact Sara Spary at sara.spary@buzzfeed.com.

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