What Penguins and Clubs teach us about profit, pricing and your brand
If you grew up with Penguins in your lunchbox and the Club jingle in your head, brace yourself. Both have lost the legal right to call themselves chocolate and are now labelled chocolate flavour. Cocoa costs spiked, recipes changed, and the coating now sits below the threshold to use the word chocolate.
At home, this ties in with a running joke. Anna has just started A-Level Economics and barely a day goes by without the weary sigh, the shrug, and “Shrinkflation, Dad, am I right?”
She is not wrong.
And it’s not a one-off either.
Think back over the last few years:
- Toblerone’s famous gaps got wider
- Galaxy bars trimmed their grams
- Terry’s Chocolate Orange got lighter
- Maltesers and other sharing bags quietly slimmed down
Different brands, same pattern. Ongoing pressure on ingredients and packaging leads to smaller sizes, spec changes, or both. Penguin and Club losing the chocolate label is another chapter in the same story.
For owner-managed businesses wanting to double profits, here are five lessons. And I am going to steal Anna’s four A-Level subjects to frame them.
1) Economics: protect margin on purpose
When a core input shoots up in price you have five levers: re-engineer, resize, reprice, re-position, or renegotiate. Most firms pull just one. The smart move is to model all five and choose the blend that keeps both margin and goodwill.
Quick win this week:
- Build a one-pager that shows contribution per unit at today’s cost and at three stress levels. If contribution turns red, you act.
- Add a second tab to compare profit per unit or per service hour when you test different specs, sizes and price points.
Anna’s verdict: “That’s just supply shocks and incentives, Dad.”
2) Politics: be open about changes
Quiet tweaks can become loud PR if customers feel misled. If you must reformulate or resize, be straight. Explain the why, show the value that stays, and give a route back when costs calm down. If you claim the taste or quality is unchanged, back it with blind tests and data.
Anna’s translation: if you are going to shrink it, say why, prove the value, and do not hide it in the small print.
3) Maths: price with a backbone
You can’t cut your way to growth. If costs have moved for good, prices must move too. Doubling turnover does not double profit if margin slips from, say, 10% to 7%. Keep your eyes on net margin, not vanity revenue.
Three signs it is time to increase price:
- Inputs are up and unlikely to drop soon
- You are at capacity and lead times are stretching
- Your value has grown through speed, service or guarantees
Anna keeps pointing at her new (pink!) calculator and saying, “Check the percentages, not just the pounds.”
4) Further maths: model scenarios, not hunches
A tiny change in one variable can swing the outcome. Build a simple matrix of scenarios across price, spec and volume. Stress test with sensitivity analysis so you see how a 1-point drop in gross margin or a 7-day stretch in debtor days ripples through cash.
Helpful set-up:
- Row headings: three price points
- Column headings: three spec options
- Within each cell: unit contribution, monthly gross profit, cash days impact
It is not rocket science, but it is the difference between a tidy profit and a slow leak.
5) All of the above: build resilience
Supplier costs will vary. A couple of years ago, it seemed that every client had been hit by higher costs due to the war in Ukraine. You can protect yourself if you:
- Dual-source critical inputs
- Add index-linked clauses to longer contracts
- Lock key volumes ahead where sensible
- Score suppliers on stability as well as price
Economics explains the shocks, politics explains the scrutiny, maths tells you the truth, and further maths helps you choose the best path.
The takeaway
Big brands have the budget to ride out mistakes. Most owner-managed firms do not. Protecting profit without denting your brand takes clear maths, clear messaging and a steady hand.
Or, to keep Anna’s subjects in the mix: the politics of trust, the economics of inputs, and the maths of margins all meet in the real world.
Your customers vote with their wallets, and the numbers always tell the story.
Cheers
Jon