Things will now be different for you if you eat chocolate…

Sometimes it’s the simple ideas in business that work.

24 years ago in April 1990, the retailer Poundland was set up. On the face of it their approach was pretty simple – all the items in their shops would retail at £1 (hence the name “Poundland”).

tobleroneThey now have over 500 stores and sell 3,000 different products which all retail at £1.

They have been incredibly successful and the company has just been floated on the London Stock Exchange with a value of £750 million.

Whilst the concept of everything in the shop being on sale for £1 has advantages such as creating a “value image” which has been successful in the recent economic downturn, there are clear challenges when it comes to what £1 can buy today compared to 24 years ago and importantly what £1 will be able to buy in 24 years time.

Looking at the 4Ps model then it’s clear that the Price has to remain at £1, Promotion is minimal with word of mouth being the preferred method and Place needs to be in the right location as people will not travel a long distance to buy something for £1.

That leaves Product.

People are attracted to Poundland because it sells recognised brands at a discount price so they can’t really switch to unknown brands. They have however identified an approach to maintaining their margins on well known products including the chocolate bar, the Toblerone (the chocolate bar with the hidden logo shown here).

Poundland have agreed with Kraft that a smaller Toblerone is produced. It is only slightly smaller than the standard bar – about one triangle shorter.

Importantly though, by reducing the size of the bar it enables the price to be held at £1.

It’s not just at Poundland where chocolate bars have been changing.

The chocolate industry as a whole is currently facing a number of challenges with Cocoa prices being very high.

So what do chocolate manufacturers do? Do they increase the prices to keep their margins or do they amend the product?

Well it seems that both Nestlé and Cadbury have been quietly shrinking the size of some of their chocolate bars on the market whilst at the same time pushing up some of their prices to maintain their profit margins.

A couple of years ago, some chunks of Cadbury’s famous Dairy Milk Bar were removed and the bar was reduced in size from 140g to 120g

Now whilst on the face of it some consumers may feel a bit cheated by this move it could arguably prove beneficial for waistlines.

Interestingly as well, will we see Poundland stocking a one chunk £1 Toblerone in a few years time?

The ExP Group