‘Last resort’: Mondelēz ups prices on select UK products

By Oliver Nieburg

- Last updated on GMT

Weaker British pound leads to 'last resort' UK price hikes, says Mondelēz. Pic: ©iStock/vale_t
Weaker British pound leads to 'last resort' UK price hikes, says Mondelēz. Pic: ©iStock/vale_t

Related tags Cost United kingdom Uk

Cadbury maker Mondelēz International has increased wholesale prices on some UK products, reporting increased cocoa costs and a weaker British pound.

“…We are having to make some selective price increases across our range,”​ said the company in a statement.

It refused to share details on affected brands and would not confirm if its chocolate brand Freddo was among the products, as reported by The Guardian.

Food products becoming more expensive to make: Mondelēz

The company said the move was a “last resort”​ to support its 4,500 UK employees and to keep consumer brands on shelf.

“We have, and continue to, carry these increased costs within our business as much as possible, because our priority is to keep our brands as affordable as we can,” ​its spokesperson said.

“It is well reported that food and drink manufacturers have been experiencing increasing commodity costs for some time which, coupled with recent foreign exchange pressures, are making food products more expensive to make.

“For example, the price of cocoa, which we import into the UK, is up by over 50% since 2013,”​ they continued.

The company said retailers will ultimately set the final consumer price.

Analyst’s view

Jack Skelly, food analyst at Euromonitor, told this site: “There may be some increase in cost of doing business in the UK, which would likely mean most manufacturers could increase their prices.

“However, I think Mondelēz is probably the most rigorous when it comes to bolstering its margins and, given how iconic their brands are to UK shoppers, it may be noticed more than other brands."

Downsizing and exchange rates

Mondelēz downsized the sizes of its UK Toblerone bar​ late last year by adding more space between the triangles. At the time, it said rising ingredients costs prompted the move. “This is not about Brexit or foreign exchange," ​it said.

The British pound is currently trading at around 1.21 against the dollar, down 19% from the day of the UK Brexit referendum on June 23, 2016 (1.49).

Average daily cocoa prices on the three future markets were 32% lower in December 2016 compared to the same month last year ($2,288 per metric ton versus $3,346 per MT), according to the International Cocoa Organization (ICCO). December prices were at their lowest since 2011.

Skelly also noted a recent decease in cocoa prices, but said costs for other commodities may have risen.

FDF members predict input costs will rise

A spokesperson for UK trade body. the Food and Drink Federation (FDF) – of which Mondelēz is a member – told ConfectioneryNews: “Confectionery manufacturers of every size have already seen a sharp rise in the price of key ingredients, raw materials and packaging as a result of the devaluation of the pound.”

A recent business confidence survey from the FDF found more than 80% of UK manufacturers expect input costs will continue to rise over the next 12 months.

“Confectionery companies have taken steps to absorb these additional costs as far as they can through efficiencies and by taking a hit in margins,” ​said FDF’s spokesperson . “Increasing the price of products is a last resort.

“In light of today’s difficult market conditions, consumers can expect to see a modest increase in the price they pay in the shops,” ​they continued.

Related news