No 42: More about market power and Cadbury

HERE is a report from the Tutor2U website:

Embroiled in what looks likely to be a protracted takeover bid from Kraft, Cadbury’s has suffered a blow with the news that its share of the UK confectionery market has dipped below 30 per cent for the first time in a while.  

The Times reports that Cadbury’s chunk of the chocolate market by value slipped 1.7 per cent to 29.8 per cent last month, the first time that it has fallen below 30 per cent all year. Market share of Mars, its biggest rival, slipped 0.6 per cent in the period. 

There are signs that aggressive pricing of basic chocolate bars by discount retailers such as Aldi and Lidl is having an effect; so too is the growth of sales for own-brand bars offered by Tesco, Sainsbury’s and the ongoing battle for customers between Waitrose and Marks and Spencer. 

Some customers have complained about a 75% rise in the price of a 230g bar of Dairy Milk in the last 12 months. High world cocoa prices have explained some of the price hike but Cadbury’s tactic of launching a new 100g bar priced at £1 had led some to claim that their are deliberately trying to anchor their prices at a higher level to raise profit margins as a defence against the takeover bid. The decline in market share suggests that chocoholics are more price sensitive than Cadburys might have forecast. 

It seems to me that part of the skill of being an economist is to be able to quickly identify the connection between real-world events (such as described above) to as many economic ideas as possible. The comment below lists the concepts I think are in the article. Before you look at the comment, see which ones you can identify yourself.

An excellent economics students is able to take the suggestions of just a few sentences of data and write a 3 page essay about it.