This week Morrisons supermarket increased the price of Marmite by 12.5% to £2.64 as a consequence of price increases from their supplier, Unilever. They, in turn, have increased the wholesale price they charge the supermarkets because their costs have risen following the fall in the pound, making goods and raw materials manufactured abroad more expensive.
This is an interesting pricing issue. On the one hand, no one likes a 12.5% price rise for anything that they buy, and enough price rises like that will have a significant impact on inflation. On the other hand, this specific price rise is on a low-cost item that most consumers treat as an impulse buy or a minor shopping choice, so individually they probably won’t notice. And how many people would drive to a different supermarket to save 40p - none.
Of course, people will change supermarkets if, on average, the prices across all the products they buy are cheaper and it’s worth the journey.
If Marmite is taken as a product on its own then it presents an interesting pricing opportunity. There are not many direct competitors, so what are enthusiasts to do if the price goes up? It is highly concentrated and so relatively little is used on a slice of toast, so the per meal cost is very low. Its price communicates something about its quality, and this is meant to be a unique ‘premium’ product.
Perhaps increasing the price of Marmite is something that Unilever should actually have done some time ago!
The full Marmite story can be read here: http://www.bbc.co.uk/news/business-37801847