Confectionery companies downsizing to beat VAT rise

Poundland has negotiated a lighter Toblerone,
with one less triangle

Confectionery companies like Nestlé and Cadbury are shrinking the size of some of their biggest brands, and simultaneously nudging up prices, in a bid to preserve their profit margins as a result of rising costs and before the rise in VAT (value added tax). Chief executive Jim McCarthy has negotiated to introduce a new, lighter Toblerone in 2011, which will be about one triangle shorter than the standard bar, so that the price can be held at one pound. Mintel Analyst David Jago says it is one of the tactics being used by confectionary groups to maintain their profit margins at a time when VAT is set to rise and the cost of ingredients such as palm oil, cocoa and sugar are soaring. Chocolate prices have risen since 2007. The Grocer magazine recently reported that Cadbury and Nestlé have pushed up the recommended retail price of top selling bars like Dairy Milk, Wispa, Kit Kat and Yorkie up to 7%, more than double the rate of inflation. From February onwards, a block of Dairy Milk will be 120g instead of 140g. This bar now costs 30% more than it did three years go.

Reaction on article

First of all, I am glad that we do not have this problem in the Netherlands yet, because I love chocolate. I think people in Britain will buy less chocolate now, so I am wondering if the companies are really going to make more profit. I am afraid the bars will not get bigger again if the companies will be making more profit. But maybe because of this, these companies can also help to fight the growing obesity problem in the UK.

Link: http://www.guardian.co.uk/business/2010/dec/17/confectionery-companies-downsizing-vat