Cadbury, the No.1 player in Australia's $2 billion chocolate market, plans to reduce the size of its big-selling family blocks of chocolate by about 10 per cent to save costs.
Subscribe now for unlimited access.
$0/
(min cost $0)
or signup to continue reading
The company blames rising packaging and raw material costs and has chosen to shrink the weight of its most popular product rather than increase the $4.99 recommended retail price.
Amanda Banfield, managing director of Australasia for Mondelez International, the parent company that owns Cadbury and other big-selling brands, including Vegemite, Kraft, Red Tulip and The Natural Confectionery Co range of sweets, said she expected a backlash.
"We have to kind of be real about that," she said. "Clearly any chocolate lover is going to be a bit disappointed".
Cadbury reduced the size of its family blocks of chocolate in 2009 from 250 grams to 200 grams, before partially lifting it in 2013 back to 220 grams because of disquiet from customers.
The Cadbury blocks of chocolate are made in Claremont in Tasmania, which churns out around 80 million blocks a year. This is the same factory Prime Minister Tony Abbott promised a $16 million injection to in the election campaign before his 2013 victory, to try to help the Tasmanian economy.
Ms Banfield said Cadbury was working through the details with the federal Government on the funding, which is part of a $66 million upgrade of the Cadbury plant, of which the company is providing $50 million.
"We're waiting for a final outcome," she said.
The decision to shrink the weight of the chocolate blocks was in response to an array of cost pressures. The 220g block is the core product of the Cadbury range, although it does sell different sizes in the range.
"We've just had unprecedented cost headwinds over the past 18 months," she said.
She pointed to rising packaging costs and a lift in the price of raw materials. The main ingredients are cocoa, sugar and milk.
Ms Banfield emphasised that Cadbury didn't set the prices the blocks sold for in supermarkets, and that big chains did sell them on promotion from time to time. "In the end, I need to be very clear, we don't set prices," she said.
About 60 per cent of sales of the Cadbury family blocks of chocolate come from the shelves of the two big chains of Woolworths and Coles.
Cadbury has a total market share in chocolate of 50 per cent in Australia, and dominates the market in family blocks of chocolate with a share Ms Banfield estimated to be "in the mid-60s".
Analysts say supermarket chains have been making inroads into the chocolate market with private-label blocks of chocolate, which sell on the same shelves as the branded products.
Ms Banfield said the reduction in weight was a business decision to keep costs down and hadn't been influenced by broader issues around tackling obesity. Rival firm Nestle, late in 2014, decided to cut the size of its Killer Python jelly snake confectionery range from 47 grams to 24 grams to cut calories and respond to consumers' concerns about sugar intake in children.
"This is not about addressing the obesity challenge," Ms Banfield said, adding that most families enjoyed a small portion of chocolate as a treat from time to time.
The Mondelez business employs about 3000 people throughout its operations in Australia and New Zealand and has annual revenues of about $2 billion.
Ms Banfield, who took over as managing director of the Australasian business in late 2013, said consumer confidence in Australia is patchy and there continues to be uncertainty in the minds of shoppers.
"I think consumer confidence has been a bit bumpy recently," she said.
The company manufactures Vegemite at a plant at Port Melbourne and Ms Banfield said decisions late in January by British supermarket giant Sainsbury's to take Vegemite off its shelves in Britain because of falling sales would leave many buyers of the product disappointed.
