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cremeeggs

Companies strive towards maintaining or increasing profits.  In the book we examine different types of costs and we know that in production these can be categorised into fixed and variable costs. We know that fixed costs do not change with output and can be difficult to change, although not impossible.  Whereas, variable cost, those costs that do change with output are often subject to investigation of efficiency, in other words can they be reduced? If a company is trying to maintain costs when they are subject to increased overheads or if they are pushing for increased profit margins, companies will often try to reduce the quantity or cost of raw materials.

 

In 2015, Kraft (in the UK) were quick to get their products out in the supermarkets straight after Christmas, in preparation for Easter. One of the well-known products that Kraft produces is the Cadbury’s cream egg. However, this year consumers were shocked to discover two things; 1) the chocolate used was no longer the UK’s loved dairy milk chocolate and 2) instead of finding six eggs in a box the quantity had been reduce to 5. It was reported that the price of the boxes were in many cases exactly the same as when the chocolate was diary milk and there were six eggs. This of course, is a clever way of trying to increase profits.  The new chocolate is likely to be at a reduced cost compared to the diary milk and consumers will very quickly forget that they used to get six eggs and five will become the norm. Both strategies reduce the variable cost per box of eggs, through quantity and cost – increasing or maintain the profit from the previous year.

Original article can be found: http://www.independent.co.uk/life-style/food-and-drink/news/nation-in-shock-as-cadburys-changes-the-creme-egg-recipe-9971856.html