Shrinkflation has been a big headline over the past week.The headlines have mainly focused on chocolate products and the rising price of cocoa.

Bluntly, the reason for these price rises is climate change - despite the rhetoric around NIC and packaging taxes (these were introduced in the UK in 2022, and the increases have been well signposted).

As the reason is climate change, these price pressures aren’t going away, and will, likely get worse until action is taken to make them go away - Financial Times https://lnkd.in/eadUnc9N

Those in commercial functions need to be clear on the challenges facing them - misdiagnosing the problem is a long term survival issue.

Let’s look at chocolate and the chocolate bar of childhood - A Cadbury UK Freddo 🍫

Once 10p, a single bar is now 35p!!! and a multi-pack which did have 5 frogs, has moved to just 4 - for the same £1.40 cost!

Incumbent business, is very much stuck in 'business as usual' and so, assuming no real action is taken, let's look ahead and see how this could play out.

In 6 months/1 years time, climate change will come knocking again, cocoa prices are going up - Where do you go next? same playbook? It's worked in the past, let's do it again - another sneaky pack shrink.

Now a Freddo multi-pack is a 3. The media and consumers ponder, at what point is a multipack not a multipack? and maybe the retailer decides a 3 is ok - but what do you do next time?

Well, you could follow the biscuit route, reducing the amount of cocoa in the product, but as penguin and club bars have found, that tactic has obvious flaws - Effectively the SKU becomes redundant, Cadburys have de-listed themselves. Simultaneously, the media picks up on the story again, consumers see the story, again and brand equity erodes. Retail buyers become tired of price increases, and seeing their name in the news alongside your brand, they start asking if they need you at all! Oh no!

So, what's an alternative? What will help you? Fundamentally changing your business model and the system in which you operate.

Turning towards circular systems can help build resilience, underpin long-term competitiveness and create the conditions for sustainable growth.

If you are in food, a first step is to start talking to your supply base, ask questions to understand how they they produce, what they need in order to move to regenerative systems, and support them in building these capabilities.

Then, start with one product (minimum viable product), and together with one supplier and one retailer (a minimum viable eco-system) re-design this one product as a pilot - It will be hard, but so is the other option - choose your hard!

#Shrinkflation
#Cocoaprices
#climatechange
#circulareconomy

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