Analysis of Polo Mint Pricing: A Supply and Demand Perspective

Desklib provides past papers and solved assignments. This report analyzes the impact of supply and demand on Polo mint prices in the UK.

Impact of Demand and Supply on the Price of polo mints in United Kingdom
Name of the Student
Name of the University
Author’s note

Table of Contents
Introduction......................................................................................................................................3
Description of the Brand..................................................................................................................3
Knowledge of Statistic supply and demand analysis.......................................................................3
Demand of Polo Mint..................................................................................................................3
Demand Curve of Polo Mint........................................................................................................3
Supply curve of Polo Mint...........................................................................................................4
Description of Theoretical factors that shift the curves of supply and demand..............................5
Reason behind the shifts in supply and demand curves..................................................................6
Concept of Equilibrium by using the supply and demand diagram 200..........................................6
Impact upon price due to the change of demand or supply using academic theories......................6
Factors that lead toward change in demand.....................................................................................6
Factors that lead toward change in supply.......................................................................................6
Conclusion 150................................................................................................................................6

Introduction
If economics is studied from the academic viewpoint , we would arrive at the fact that
demand and supply are inversely related in normal market conditions. Which in lay man terms
means that if demand is high and supply low prices will shoot very high while if demand is low
and supply is bountiful , the price will slump. The report below incorporates the various factors
that affect the price of a product with demand and supply forces acting on the product being
operated in the market. The case of polo mint, a product of Nestle is being considered for
analysis in relation to supply and demand forces acting on price at which polo mint is retailed in
the consumer market of United Kingdom. Equilibrium arrived at after demand and supply forces
have acted and adjusted themselves in relation to each to other has also been discussed along
with factors that change demand and supply for breath freshening product that polo mint is. A
diagram too has been illustrated to further exemplify the phenomenon.
Description of the Brand
Polo is branded and sold in the UK as the mint with a hole. If the pack is opened , it has
generally twenty three individual pieces mint hole candies. They generally are white in colour ,
and packed in the wrap with stripes of green and white , with the letters of the brand POLO
printed on the wrapper from top to bottom. . It generally is very popular amongst the youth in
United Kingdom and is generally consumed by boys and girls before they leave for dates so that
foul breath doesn’t fail their dates. These candies are often sold in grocery stores and
supermarkets. The individual candies are 1.9 cm in diameter and 0.4 cm in thickness .

`
Knowledge of Statistic supply and demand analysis
Demand for sweet candies has taken a dive in the United Kingdom . In comparison to the year
2017 the sales of polo mint in the United Kingdom market dipped by 9.7 percent. It in fact fared
worse the market average. The mint market sales revenue dipped by an average of around 7.7
percent. The absolute revenue for the polo mint candy sales from the United Kingdom for Nestle
was One hundred and fifty million pounds. As mentioned earlier , due to rising health awareness
and harmful effects of sweet candies on health in addition to large number of people quitting
smoking and hence not requiring to freshen their mouths after the act . These developments have
the potential to intellectually challenge the management of Nestle, the parent company that
manufactures polo mint to look for healthier substitutes for maintaining and expanding the fiscal
bottom line of the company.
Demand of Polo Mint
Polo mint as a product and as a product category is witnessing shrinking demand . The reasons
galore right from increased awareness among the people of the United Kingdom regarding the
harmful effects of consumptions sweet candies like polo mint . Sweets made from refined sugars
can cause all kinds of ailments right from type 2 diabetes , obesity and numerous others.
Increased health awareness has also meant that increasing number of people in the United

Kingdom are quitting smoking. Hence the above developments are causing the demand for polo
mint to slump.
`
Demand Curve of Polo Mint
As the graph indicates , demand for polo mint is inversely proportional to the price of polo mint ,
(cetris peribus ) which means that other conditions remaining constant . For example if income
of consumers or tastes of consumers change in favour of polo mint , than in spite of increasing
prices , demand will not decrease and vice versa.
Number of Polos
Figure 1: Demand Curve
Supply curve of Polo Mint
As indicated by the two dimensional graph below

As the quantity of polo mints available in the market gets consumed and has greater uptake by
the customers, being a product consumable manufactured on a large scale under process
automation , the price of polo mint drastically drops. Inversely , as the supply is constrained
say ,maybe due to faltering supply chain, with rising demand , the price of the polo mint also
rises .
Description of Theoretical factors that shift the curves of supply and demand
According to economic theories , supply and demand curves are inversely proportional to each
other , to elaborate further when supply is plentiful , prices drop demand rises and as demand
keeps rising and supply cannot keep up . The price of the product again starts increasing , and as
the prices go on increasing , after a certain point demands dries down and the cycle keeps going
on endlessly.

Reason behind the shifts in supply and demand curves
In the specific case of polo mint while the supply may have increased with passage of time for
the reason that with passage of time better means and methods of production and advances in
technology and economics of scale have driven down the prices of production for Nestle for the
purposes of production of polo mint. As Nestle is diversified and globally competitive in respect
of raw materials procurement and even procurement of factors of production , operation ,
distribution and sales. Nestle is capable of supplying more polo mint candies than the entire
United Kingdom can consume even in a generation, so there are no supply constraints that Nestle
faces in respect of procurement of raw materials and production , and distribution of polo mint.
However with increasing awareness of the harmful effects of sweet candies like polo mint ,
which can cause type 2 diabetes , obesity and many other ailments . As well as large number of
people deciding to quit smoking , demand for confectionaries in general and polo mint in
particular is facing dipping sales.
Concept of Equilibrium by using the supply and demand diagram 200
Equilibrium may be defined as the steady state in any discipline . In economics it is no different .
Supply and demand are two major forces of a market that determine whether it will be scarcity
that plagues the markets driven by unrestrained market actors or abundance that rain in the
markets. However these outcomes are only arrived at by presuming ideal market conditions,
factors and actors which operate in the market . Hence in the ideal markets , equilibrium could be
arrived when supply and demand are in agreement with each other . To elaborate further ,
producers want to supply the maximum possible quantities of goods and services at highest

possible prices that they desire to charge . On the other hand customers want to purchase the
maximum possible amount at lowest possible prices that they can drive down through
negotiations. Both scenarios represent extreme situations , neither of which are plausible in near
real market conditions. So generally presuming market conditions to be even ideal , both
producers and purchasers arrive at a price point that represents the best compromise for both of
them .In the case of polo mint , every year the management of Nestle has the data and data
crunching tools . Supposing that , in one particular year while the costs of production have come
down drastically . Enhanced and more efficient means of transportation have been in operation
for some time . It will not be very difficult for the management to slash down the prices of polo
mint if market uptake of the product is weak to revive up the demand . On the other hand if
demand for the product keeps growing at a strong pace and supply and production can keep up
with the demand , as well as enhancing the price of polo mint is calculated not to lower the
volume or value sales . Then the Nestle management can simply go ahead and revise the retail
prices of polo mint upward. That way they will realise higher revenues and profits.

Impact upon price due to the change of demand or supply using academic theories
Study of demand and supply constitutes household and firm economics study which comes under
the purview of microeconomics . A special branch of the economics . Under theories of market
economics, prices are determined by the factors of demand and supply of the product or service
in question. A product is generally supplied by the household producer or a firm producer with
the assumption that the returns they receive in terms of cost incurred in developing ,

manufacturing and supplying the product or service will be more than compensated by the price
of the product or service offered under standard market conditions. On the other , demand for a
product or service comes from household and they offer the price for the product or service with
the conviction that utility and value provided by the product or service being purchased will
exceed the price paid for it.
If price is fixed by the government or some other regulatory body then changes either in demand
or supply have no effect whatsoever on the price of the product or goods being sold in the market
. Prices for many goods and services are around the world are controlled by either the
government or some regulatory bodies.
In market conditions prices increase or decrease based on the demand and supply factors. When
demand for a product or a good shoots up , with supply being constant , prices go northwards and
may in fact go through the roof i.e.. go out of control . While if demand is constant , and supply
keeps on increasing , prices hit rock bottom.
However in real market conditions , neither supply , nor demand remain constant. So in most
market situations prices keep fluctuating in an unpredictable manner. But the issue more
complex than it seems. The markets themselves are never perfect. Some markets are oligopolistic
. which means that multiple producers and sellers form a cartel and determine the price and
supply of the product or service .

Factors that lead toward change in demand
In the specific case of polo mint , multiple factors can lead to change in demand of a candy like
polo mint in the United Kingdom confectionary market. With every passing day people are
becoming increasingly conscious of their health, with the result a sweet candy that if consumed
in excess can cause diseases like type 2 diabetes, obesity and in the long run even blockage of
arteries . Polo mint or for that matter any sweet confectionary has loads of refined sugar in it
which causes the above mentioned diseases . More over increasing health consciousness has also
prompted people in the United Kingdom to quit the habit of smoking either by themselves or by
availing the services of de-addiction centres of the NHS. Recently many pharmaceutical
companies are selling good tasting candies that do not contain diabetes causing sugar or the one
that causes obesity and still make the urge of smoking die away. The above developments have
seen sales of many candy brands to take a hit, including polo mint.
Factors that lead toward change in supply
Any product or service requires inputs for delivery or production . In case of polo mint , the
ingredients which make the polo mint are sugar peppermint and other edible elements. If the
there were a surfeit of sugar supply in the market the sugar to the manufacturing plant was made
nearly at insignificant cost in comparison to the market price of polo mint , the price of the polo
mint can be afforded to be reduced drastically if demand doesn’t slump during the process of
price reduction. Again if peppermint were made available to the company at insignificant costs
in comparison to the market price of polo mint then again the market supply of polo mint could
increase dramatically if the factory management so decides and again presuming that prices do
not take a hit southward in the meantime .

Conclusion 150
To conclude , we can say that the Nestle management has to ingeniously innovate and bring to
the market of the United Kingdom , edible products that would offset the revenue loss incurred
after the polo mint manufacture and sales is discontinued .Nestle has to develop edible products
that are not only palatable to the senses but also make health sense to consume and at the same
time can be manufactured in a manner that does not degrade the environment and is as or even
more economical to produce as polo mint. Raw form of sweeteners are available around the
world that have no detrimental effects on health and in fact are rich in vital nutrients and
minerals absolutely essential for healthy existence of any individual anywhere around the world .
A temperate country like the United Kingdom can perhaps only rely sugar beet for extraction of
sugar. But if Nestle were to start sourcing its sweetening raw material from tropical countries ,
they will have many more options that may even exceed all desired outcomes of economy of
production and health benefits upon consumption. India has a very healthy and raw form of
sweetening raw material called jiggery which is extracted processed from cane sugar. As jiggery
is in raw unprocessed form , it is rich in all kinds of nutrients. Not long before , jiggery was not
available in powdered form . However after entry of Patanjali Foods , jiggery is available in
powdered form throughout India . If Nestle were to partner with Patanjali Foods , Nestle can
again take the confectionary market of the United Kingdom by storm. Other forms of sweeteners
like coconut sugar and date sugar are also available that are much healthier than refined beet
sugar or refined cane sugar. Nestle being a behemoth multinational company with its
headquarters in Switzerland , regarded as heaven by many and know for responsibility towards
the nature and entire human race , should make every move business or otherwise aimed at