Chocolate and rising ingredient prices Sugar in chocolate bars such as KitKat, Milkybar and Yorkie is being slashed by 10% – but Nestle say it will not change the taste. The move comes ahead of a Public Health England (PHE), child-obesity report which will expose brands that fail to meet sugar targets. Nestle says it has mastered a secret method which uses natural ingredients to alter sugar crystals so they taste sweeter in smaller amounts. The reduction in brands including Aero, Smarties and Toffee Crisp will result in 7,500 tonnes of sugar removed by 2018. Nestle’s Fiona Kendrick said: “We can have a significant impact on public health.” PHE said: “This sends a message that reducing sugar in food is possible.” It comes just one month after some of the biggest chocolate manufacturers told how they were reducing the size of their products by 20 per cent - to meet the PHE's sugar targets. According to The Sunday Times, big names such as Mars and Mondelez - (the American company which owns Cadbury) could all be altering their products to avoid being highlighted in a new report by Public Health England. Nestle at the time; however, revealed they were looking into other options to reduce their sugar content. Nestle said in February: “While re-sizing is an effective way to reduce sugar, calories and fat from confectionery, it is certainly not the only choice. “Recipe reformulation, ingredient substitution and the use of new technologies are all possibilities and with the right investment behind them, could deliver significant reductions. “Nestlé is in the process of looking at all options and we are keeping in close contact with PHE while they establish their sugar reduction programme”. Sadly, while their 'restructuring' technique may help our teeth, the aftermath of Brexit will see the prices of our chocolate favourites go up to more than £1 in 2018. A combination of factors including inflation, falling production and increase demands from developing countries have been driving them up in recent years. But since Brexit and the plummeting value of sterling, the increase has accelerated. According to mysupermarket.com, prices have jumped by 13 per cent since just last year. Gilad Simhony, CEO of mySupermarket.co.uk, said: "If this rate continues we could be paying over £1 for a regular bar in 2018. Similar developments are occurring in Ireland. For example, previously Mars bars could be purchased for €0.90 in the IFSC Spar branch, and at that price 100 Mars bars were sold during the lunchtime trade. According to the Standard Model of Consumer Behavior consumers are rational and utility maximisers and so following a price rise for Mars bars to €1.30 people are buying less. The manager of the Spar retail outlet in the IFSC has noted a falloff in demand of only 50 Mars bars now being purchased during the lunchtime trade. Price rises for Cadbury’s chocolate bars have yet to be introduced in the Spar store. The public outcry that recently greeted the shrunken Toblerone may be about to reach fever pitch, as a host of other famous chocolate brands could be forced to downsize. The confectionery industry has a history of “shrinkflation”, where prices remain the same as portion sizes get smaller but conditions this year have put particular pressure on chocolatiers. Mondelez International, the US company that makes the iconic triangular bar, said it was forced to make the unenviable decision between increasing the price or the size of the gaps in its bars. A helpful “milk chocolate index” from analysts at Mintec shows the combined price key ingredients cocoa butter, cocoa powder, whey, sugar and whole milk powder, is up almost 30 per cent this year. Cocoa butter has fared particularly poorly, as bad weather in producer countries has combined with a rise in global demand for a chocolate fix, causing prices to jump almost 40 per cent in 2016, adding to steady increases over the past four years. During that time, a six-pack of Creme Eggs became five, Mars and Snickers shrank and a one kilogram tin of Quality Street lost 180g. There have been signs that the market has stabilised over the past number of months as more cocoa beans have become available but margins are expected to remain tight. Along with balancing current ingredients costs, Nestlé are considering changing the wages of their workers in their six production facilities across the UK. They are looking at changing those workers on the minimum wage of £7.50 (in the UK it’s called the National Living wage) to the Living wage of £8.45 an hour. Discussions are ongoing in order to get a detailed estimate in relation to the impact this will have on the firm’s cost of production. Question: Provide a detailed analysis on the case study above using THREE OF THE FOUR following Economics concepts (i) demand and supply, (ii) elasticity and total revenue, (iii) the standard model of consumer behaviour and (iv) the effect of implementing the Living Wage on the firm and the individual.