When faced with seismic pressures that may affect the very market position your products and brands hold, how does a manufacturer respond?
When faced with seismic pressures that may affect the very market position your products and brands hold, how does a manufacturer respond?
We have seen exactly how one manufacturer has responded to the new living wage and Brexit led rising commodity price rises and exchange rate fluctuation (the clue is in the picture above) – what is intriguing is the reaction and response.
For years now we have seen how downsizing a product has allowed prices to be maintained ? for a while at least, whilst protecting margins. Does anyone think that our favourite chocolate bars are the same size they were 30 years ago? What has caused such an immediate backlash against the makers of Toblerone?
Do we feel affronted by the change? Ought not they surely be applauded for not following the other route favoured by chocolatiers, to reduce the cocoa content to levels that more closely match those of a lightly dusted cappuccino?
Is it that the change is not subtle enough? There is an argument to say that the easiest option would have been to shorten the bar (“Doh”). This might well have saved on tooling costs, and the frankly shocking alteration to the visual characteristics the consumer has come to expect for so many years.
Perhaps this was not possible. Perhaps also it was not possible to absorb the very real but frankly temporary rise in commodity prices, or mitigate them through wasting less, or being more productive; solutions we ourselves would advocate not only as a first step, but likely to yield greater benefit. It is notable that large, marketing-led brand businesses tend to ignore the engine room because it’s difficult and not so sexy.
Consumers have no way of truly knowing whether the reduction in chocolate volume represents a fair reflection of commodity price inflation, and exchange rate fluctuation; this must be taken on trust, and it is here that there is a deficit that should trouble Mondelez. It doesn?t look fair, it doesn?t feel fair, and like a stack of Jenga with half the pieces missing, it doesn?t stack up.
Written by Keith Armstrong, Director of Applied Acumen
