Brexit-Hit Pound Bites Toblerone, Shrinking Some U.K. Bars

(Bloomberg) -- Higher costs in the U.K., where a Brexit-battered pound is squeezing retailers and brand owners, have chiseled away the craggy Alpine shape of Toblerone chocolate bars.

Mondelez International Inc. has reduced the weight of some Toblerone bars in the U.K, it said in a statement on its Facebook page. The company also changed some bar shapes, expanding the gaps between the triangular segments.

“Like many other companies, we are experiencing higher costs for numerous ingredients,” Mondelez said. “We carry these costs for as long as possible, but to ensure Toblerone remains on-shelf, is affordable and retains the triangular shape, we have had to reduce the weight of just two of our bars in the U.K.”

Mondelez is the latest of a number of companies to face cost pressures in the U.K. in the wake of the vote to leave the European Union, which drove down the pound and made imports of raw materials more expensive. In addition to the weak pound, chocolate makers have been squeezed by inflation in commodities like cocoa butter and sugar.

Mondelez didn't mention Brexit in the statement, issued last month, citing higher ingredient costs. The changes affect the U.K. only, a spokesman said Tuesday after the new sizes reached British store shelves. One of the Toblerone bars that has been shrunk -- to 150 grams from 170 grams -- is mostly sold at the Poundland chain, he added.

Tesco, Unilever

Rather than increasing prices, Mondelez opted for an approach called “shrinkflation,” in which product sizes are reduced instead. In a highly competitive retail environment, outright price increases have been more difficult to pass on to consumers. 

The U.K.'s largest grocer, Tesco Plc, last month briefly pulled Marmite spread from its online store after brand owner Unilever sought to raise its price. The companies agreed to a settlement that kept the price unchanged for now, but rival grocer Wm Morrison Supermarkets Plc increased the price of a 250-gram jar of Marmite spread by 12.5 percent.

Birds Eye Ltd. has said it will raise the price of chicken nuggets and other products, while Walkers Snack Foods Ltd. is set to increase the cost of potato chips.

Apple Inc. last month raised the U.K. cost of some of its machines including the Mac Pro by 20 percent, while Microsoft Corp. said it would increase the price of its enterprise software and cloud offerings by as much as 22 percent. Sweden's Electrolux AB boosted prices of its home appliances by 10 percent.

The Bank of England in September warned U.K. consumers to prepare for shrinkflation, saying in a report that U.K. retailers were “re-engineering” products to make them smaller while holding prices steady.

To contact the reporter on this story: Thomas Seal in London at tseal@bloomberg.net. To contact the editors responsible for this story: Eric Pfanner at epfanner1@bloomberg.net, Paul Jarvis