Research Paper on Supply and Demand Analysis of Polo Mints in the UK

Introduction

Polo Mints is a brand of breath mint characterised by a hole in the middle. The confectionery legend George Harris famous for the Rowntree's biggest inter-war brands including Dairy Box, Black Magic, Aero, Smarties and KitKat, was the person behind the concept of Polo Mint. Though the idea was developed in the 1930s, it was shelved due to the Second World War and sugar rationing. The story has it that George chose the name Polo because it derived its name from Polar which he thought implied the cool freshness of mint. Alex Hutchison, Nestle Historian, and UK archivist note that in the pre-war years' confectionery companies transformed themselves from manufacturing fancy confectioneries in packaging that cost more than the product, to companies that sold affordable products and confectionery innovation (Reynolds, 2017). Hutchison further notes that though rationing and sugar shortages kept confectionery manufactures in a sorry state, Polo stood out. Polo had launched in the pre-war years in 1948 in London and South East England then gradually grew nationally by 1952.

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In its packaging, Polo mints are usually packed in individual packs of 23 mints which measure about 10 centimetres tall. The tube of the Polo mints is enveloped with an aluminium foil backed paper (Reynolds, 2017). The wrappers are either green or blue and have the word "POLO" on them. Nestle has attempted to have the shape of the Polo mint registered as its trademark unsuccessfully as it was challenged by Kraft Foods who owned Lifesavers and Mars UK -on the base that it lacked the unique character of the mint they offered.

Basic Concept of Demand and Supply

Supply and Demand form the foundation of the market economy and is a fundamental theory of economics. The amount of goods and services desired by the buyers is called demand (Fisher, 2007). The quantity demanded by the buyers is usually at a certain price and is comparable to other suppliers. Demand relationship is the relationship between the quantity demanded, and the price buyers are offering.

Supply characterises how much goods and services the markets can propose. The amount supplied is connected to some goods manufacturers are willing to supply when offered a specific price (Fisher, 2007). The connection between price and quantity of services and goods supplied encompass the supply relationship. The relationship between demand and supply is reflective of the powers behind the distribution of wealth and is allocated in the most efficient way possible.

Equilibrium

When supply and Demand are equivalent, that is, when the demand function and supply function intersect, the economy is said to be at equilibrium (Davidson and Smolensky, 1964). At this juncture, the allocations of the goods are efficient because the amount of goods being supplied is approximately the same as the number of goods being required. The market situation is said to be at equilibrium as everyone is pleased with the current economic viewpoint. At the given price, dealers are selling all the goods that they have produced, and buyers are receiving all the goods that they are requesting.

Demand

Demand means a longing to buy a commodity in which consumers have the power to purchase. The Law of Demand states that: At greater prices, a small amount will be demanded than at lower prices, other factors being constant (Fisher, 2007). On the other hand, at lesser prices, a greater amount will be demanded, other factors being constant. In observance of the law, people tend to substitute in approval of low-priced commodities and a change in purchasing power arises when the price of a good change.

Demand Curve denotes the amount of the goods that a buyer is keen to buy and is capable of buying over some time, at a specific price is acknowledged as the quantity demanded of that good.

Factors Affecting Polo Mint Demand

Age Group of the Target Population

The product mainly targets the youth from the middle and upper class. However, some adults and older people also use the product. The target age group has not changed much; hence the demand for the product has remained constant, and by the increase in population, the demand for the product also rises. Another segment targeted by Polo mint is people looking to have sweet after mint.

Taste and Preferences

Taste and preference also impact on the demand to a larger extent. In case of confectioneries, the hard consumers that prefer the mint taste would use it even if prices of the mint went up. But if the consumer has no taste or preference of mint, then prices increase the will not alter demand for the product.

Moreover, as consumers continue to become increasingly health conscious and go for sugar-free options, demand for confectioneries such as Polo mint is falling. The sugar-free version of the Polo contains sorbitol. To appeal to the different taste Polo mint comes in other variations such as fruit flavours, and lemon and lime flavours among others. However, have not aided it in boosting demand. A Daily Mail reporter (2018) notes that Polo sales went down by 9.7 per cent a drop he attributes to consumers cutting down on sugar, using alternatives such as chewing gum and declining number of smokers.

Government Policies

Government policies influence the demand for the product by affecting tax or introducing other measures. A press released by the UK governments in 2017 set out a new regulation on the food industry. The government set out a technical guideline for the industry to reduce the amount of sugar in its product (UK Government, 2017). One of the product targets is the confectioneries under which Polo Mints fall. Such government regulations can boost demand as it increases consumer confidence that the manufacturers will weigh in health concerns in their production.

Competition from Relative Goods

Polo Mint has progressively lost its appeal to customers due to lack of innovation in the Polo brand and insufficient power in its advertisements. Its status in the market has significantly been influenced by spirited competitive efforts from competitors such as Softmints, Trebor Spearmints, Trebor Mints, and Trebor Extra Strong Mints. Consumers are increasingly choosing from a variety offered by competitors rather than Polo Mint.

Demand for polo mint initially came from a product of food giant Nabisco, Lifesavers, which is has a similar shape to Polos. Lifesavers sweets were marketed as "the original mint with a hole". A challenge by Nestle to challenge Lifesavers was thrown out in 2004.

Income of the Consumers

There is a direct association between the demand for a product and the income of the buyer. However, in the case of Polo mint, it can be assumed that they only take a small proportion of income spent by consumers on other products and a. Therefore, they will not notice a small rise in price and will consequently not react strongly to the price change in one way or the other. This view is challenged by Lipsey and Harbury (1992) the fact that "many other close substitutes to the mint as well as sucking sweets. If Polo raises price greatly, mint suckers will switch to other brands of mint and to other types of sucking sweets". Increase in income among UK citizens will lead to increased demand for polo mints.

Time

Time is also an essential factor that impacts on the demand for mint. The demand for mint surges during the festive seasons and through summers.

The shift in Demand Curves

The shift in the Demand curve denotes the variation in demand due to changes in other factors at a constant price. The shift comprises of two types, upward shift or downward shift.

Upward Shift

When the demand for a product rises, the price being constant, as a result of a change of other factors such as an increase in income. If the income of buyers rises, then there is a higher probability that the buyers will increasingly use mint as illustrated in the diagram.

Downward Shift

The downward shift follows when the demand for the product reduces at the same price. For example, when competitors adopt sugar-free mints, then demand for Polo mint will go downwards.

Supply

Supply means the number of goods offered for sale in a market at a certain price during a given period.

The Law of Supply states that if the price of merchandise grows, the Squantity supplied will also grow as the supplier will agree to supply more to earn an additional profit (Fisher, 2007). Observance of the law arises when higher prices grow the incentive for increasing manufacturing and also the law of increasing costs. A consequence of the law is that there exists a positive association between price and quantity supply.

Figure 5 shows the movement of a quantity from Q1 to Q2 and the reaction in price from P1 to P2. This demonstrates that as the prices increase the producers are willing to supply more.

This holds in the case of Polo Mint since as the prices increases there will be an increase in supply up to a positive level as there are other constrain like availability of closed substitute. If the producers of the Polo mint continually increase the price, then the demand for the mint will decrease because numerous other alternatives exist.

Factors Affecting Polo Mint Supply

Price of the Product in the Market

As observed in the law of supply, the price is confidently associated with the quantity supplied. For Polo, if there is an increase in the price of the mint and sucker sweets the producers will be willing to produce more mint products.

Number of Consumers

If the number of consumers is high, the supplier will be willing to supply more to satisfy the need for a large number of consumers. According to the 2011 UK census, the national median age is 40.5. Moreover, 21 per cent of the overall population of England and Wales was under the age of 18 years, 29 per cent was aged between 18 and 39 years. This illustrates that the target market of the Polo Mint is lively and can sustain the supply from the company. As of 2017, the birthrate stood at 12.1 births per 1000 population. This means that the target population of children is fine and hence the supply could improve.

Price of Inputs

Inputs in the confectionery industry include cost, machinery, among others. If there is no shortage in supply or cost of these elements will decrease. As a result, the producer will be willing to supply more products at the same price. Though sugar shortage of 2016 pushed prices high, the sugar levy of 2017 forced producers to slow down on production. The government verdict to exercise compulsory sugar levy was cognizant of the fact that high sugar levels were linked to type 2 diabetes and diabetes. Sugar is a vital input in the confectionery industry as witnessed by decreased and almost no production during the world war due to sugar rations.

The input price factor is evidenced by Polo mint mother company, Nestle, moving to manufacture from Britain to Continental Europe in a bid to lessen the cost. The upwards cost is also as a result of the depreciation of the pound which has squeezed the operator's profit margin.

State Of Technology

An improvement in the state of technology smoothens production process as well a cost; as a result, the supplier can supply more at the same price. In 1996, the company introduced a manufacturing technology that saw Polo mint produce tiny round mints. Its advertisements showed a solid Polo on a factory conveyor belt having a hole punched out by the machine. The sweets sales increasingly went up. Even today, a sizable number of customers are fascinated by...