The big news story in the UK today is the fight over the price of Marmite. The manufacturer of Marmite – Unilever – wants to raise prices by 10%, ostensibly due to the fall in the pound since Brexit, while major supermarkets like Tesco are objecting on behalf of their customers.

Marmite, for those who have never tasted this sublime delicacy, is a spread that is consumed almost exclusively in the UK. There’s a NZ variant – made in a factory that was affected by the earthquake there a few years ago, the so-called marmageddon – and the Australians make a pale imitation called Vegemite but the genuine product is a UK one. It is, as various people have pointed out, made in the UK from UK ingredients, and thus there is no reason why its price should vary based on currency exchange rates.

The same goes for a number of the other products Unilever is trying to raise the price of, which suggests that there’s something else at stake here. The obvious suggestion is corporate profit margins as Unilever does its accounts in Euros, but Tim Worstall clearly explains that the 10% rise is excessive. In other words Unilever, a company that was quite vehemently on the Remain side, is taking advantage of the Brexit environment to jack up prices and profits.

This could end up backfiring spectacularly. It turns out that Unilever has an entity in Switzerland that is used to move tax liabilities

The point of Unilever running the purchases through Switzerland, means that the Swiss entity then owns the raw materials (and also the finished goods – the legal/finance people will ensure this).  Then, the individual Unilever country offices around Europe have to buy these materials from Unilever in Switzerland – at hefty price, no doubt including the royalty/IP charges for the Unilever recipes which will also be owned by Switzerland.  This has the effect of moving money to Switzerland from the UK/Germany/wherever else.

If Unilever is perceived as both price-gouging and tax-evading then it’s brand reputation is likely to suffer in the UK. I don’t know what precise proportion of Unilever sales occurs in the UK but the Spectator suggests about 5%. Or at least it was last year. If other UK supermarkets follow Tesco’s example and stop ordering Unilever products, the Unilever’s sales are likely to take a significant hit. The Grauniad thinks that the supermarket chains are going to have to cave in and pass on the price rises to their customers. But that’s not necessarily the case because most Unilever products (ironically Marmite is an exception) have equivalent own-label competitors in most supermarkets. What we are about to discover is whether supermarket branded products for food and household goods are considered equal to ones with Unilever brand names. I’m guessing the answer is going to be, in many cases, that actually a lot of consumers are quite content with the own label quality and don’t see a reason to pay a Unilever premium.