Businesses are unwittingly entering the political fray with post-Brexit price rises

 
James Frayne
Walkers Crisps
Now Walkers owner PepsiCo is understood to be putting its prices up (Source: Getty)

More businesses are justifying price rises by blaming the fall in the pound post-Brexit.

Whatever their commercial reasons, this is an extremely dangerous game. Commenting in these ways means entering the political arena at a sensitive time. These firms should be ready for serious scrutiny and hostile comment – now, but more importantly in the months ahead.

First it was reported that Unilever was planning to raise the price of Marmite to retail customers. Now we hear PepsiCo and Nomad Foods – the owners of the Walkers and Birds Eye brands respectively – have indicated they will do the same as costs rise. It will be down to supermarkets and other retailers whether to pass these costs on to shoppers at the tills, but this is surely a risk.

As Unilever found, some of the eurosceptic print media may give businesses a rough time for inadvertently giving the legacy Remain campaign useful ammunition. Those businesses might be tarred with a “pro-Remain” brush in what is a brutal ongoing battle. This is inconvenient but ultimately manageable.

Much more serious problems will come for any companies that raise prices for customers now amid huge publicity – but then fail to cut them when sterling recovers and their costs go down. It is rare for the public to hear corporate statements when they explain price rises, but nobody should be under any illusions: the public are hearing this one about sterling.

Read more: #Marmitegate is back - but this time it's at Morrisons

In the highly competitive world of retail, businesses absorb cost increases for as long as they can and do not pass on costs lightly. Some businesses will credibly argue that Brexit was merely the thing that tipped them over the edge – having absorbed lots of other costs in the past, like increases in fuel and commodity prices. They might say that a rise in sterling does not change the fundamentals.

That will not matter. All that will be heard by ordinary people is that a business raised prices when the pound was low, and failed to cut them when the pound recovered. The merits of their argument will not matter – in such circumstances there would be an obvious danger that people think changes in business costs never work in their favour. Ask energy providers about this phenomenon.

Many businesses that are considering commenting on the impact of Brexit need to understand that they are engaging in political debate. They will argue that politics could not be further from their mind and that they are merely talking about the economy. That is wishful thinking. Politicians, political parties and pressure groups, not to mention the media, will drag firms into political debate at any opportunity if it suits them.

Read more: Was Marmite-gate a PR disaster for Unilever?

Businesses often struggle with politics because they do not take public opinion seriously enough. While they obsess about perceptions of their own products and brand, they tend not to ask what the public thinks about key issues that surround their business. This means that they often fail to spot potential flashpoints that those in politics and the media thrive on.

None of this is to say that businesses should steer clear of public comment. On the contrary, businesses should massively broaden their interest in what the public is thinking and saying about important issues. And they should engage in debate in order to shape the reputation of their organisation and key issues that surround it.

But businesses cannot just dip their toes in the water. They should either try to keep their heads down permanently (a difficult job, to say the least), or engage regularly to explain their actions to the general public and interested stakeholders. Firing the odd statement off about highly emotive issues, without sufficient explanation or context, will end badly.

The truth is, however, that even those that engage in such proactive dialogue with the public will struggle to explain why prices are not cut as sterling rises. Good luck with that one.

City A.M.'s opinion pages are a place for thought-provoking views and debate. These views are not necessarily shared by City A.M.

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