In today’s Finshots, we tell you how the Toblerone chocolate lost its Swissness.
The Story
What’s the first thing that comes to mind when you hear ‘Toblerone’?
Most of us might picture this ― crunchy milk chocolate pyramids wrapped in an elongated yellow cover with the image of a mountain in the Swiss Alps.
But soon, this image of Toblerone could change. At least a bit. Mondelez, the US parent of the Swiss bar, has decided to drop the iconic Matterhorn mountain and strike out the ‘Of Switzerland’ claim from its packaging. Or should we say, it had no choice?
You see, although Mondelez acquired Toblerone in 1990, it has been produced in the Swiss capital of Bern for almost 125 years. And everything about the chocolate is Swiss — from its creator Theodore Tobler, the iconic pyramid shape inspired by the Swiss Alps, the Matterhorn image…everything!
But Mondelez has been in a bit of a fix lately. Demand for its chocolates has been soaring across geographies. And it is exceeding its expectations. On the other hand, Mondelez is also facing a big jump in raw material costs. Energy prices are through the roof in most parts of Europe and the company is having to raise its prices.
And if Mondelez had to balance its profit margins, it had to find a way to meet increasing global demand, while keeping costs reasonable. So, it came up with a plan. In June of 2022, it decided to expand the production capacity at Bern to meet demand. But, it also decided to do something else. Something that wouldn’t make the Swiss happy. It moved a part of Toblerone’s production to Slovakia. It wanted to capitalise on the cheaper wages in the region to cut its costs.
But by doing this, Mondelez was breaking a cardinal rule — the ‘Swissness Rule’.
What’s that, you ask?
See back in 2013, the Swiss realised that people associated a standard of quality with products of Swiss provenance. That they were willing to pay more for the Swiss tag. In fact, 20%-50% higher for certain luxury products — watches like Rolex and Tissot. These were products that proudly said, ‘Swiss made’, ‘Of Switzerland, and ‘Made in Switzerland’ on it.
But there was a problem.
People manipulated these labels. They found loopholes in the law passed in 1971 and exploited it. For instance, the law back then simply said that at least 50% of the value of components needed to make the watch movement should be from Switzerland. Think of the watch movement as the engine of the watch. It’s what makes it tick. It’s crucial. But, this also meant that most of the other components could come from outside the region. The glass and casing could come from China. The strap could come from Vietnam. And a manufacturer could simply conduct the final inspection in Switzerland and stamp the ‘Made in Switzerland’ tag on it. Pass off what was inherently a lower quality product as a Swiss-made one and charge exorbitant prices.
The result? Customers were tricked into thinking that they bought a genuine Swiss watch. And it was a huge reputational risk for the country.
That’s when the Swiss decided to change the rules. It passed a law in 2017 and told watchmakers that at least 60% of the final manufacturing cost for a whole watch must be incurred in Switzerland. Not just for the movement of the watch but the entire thing — glass, casing, and strap. Also, the technical development of the watch must happen within Switzerland itself. They couldn’t outsource that part to anyone else either.
This would protect the Swiss brand.
But some folks thought even the new rules were too lenient. H. Moser & Cie decided to drop Swiss Made from its watches in protest. It felt that the tag had become too far devalued by then.
Now, while we’ve used watches as an example, the Swissness Rule wasn’t limited to that. It would include a whole swathe of things that the Swiss were famous for. For instance, chocolates like Toblerone!
And the rule says that if it’s a milk-based product, not only does the milk have to come from Swiss cows, but the entire processing and manufacturing must also take place in Switzerland.
So yeah, that’s why Toblerone’s Slovakian bars won’t be ‘Swiss’ anymore. And why it’s getting a packaging makeover.
The only question is — without the Swiss branding, will Toblerone be devalued in the eyes of its loyalists? Will people not be willing to pay a high price for a bar of chocolate that isn’t made in Switzerland?
How these factors will affect Mondelez is anyone’s guess.
Anyway, while Switzerland is lucky and is even getting its famous chocolate brand to tell the ‘truth’ about its origins, the US hasn’t been that fortunate. See, a decade ago, the country tried to score an advantage with its beef products. It wanted US-raised beef to command a premium. Just like a bar of Swiss chocolate. So it slapped COOL (Country of Origin Labelling) on it to prove a point.
But, this annoyed Mexico and Canada. These North American neighbours raised a lot of cattle and exported it to the US. And they felt that with the ‘Product of USA’ label, America was trying to score a marketing advantage over them. People would prefer a ‘Product of USA’ package over a ‘Raised in Mexico, Processed in USA’ label. It would hurt their business.
So they dragged the US COOL to the WTO (World Trade Organization).
And guess what…the WTO actually ruled in their favour. The US had to backtrack. And it said, “Okay, we’ll change our COOL. We’ll label it as a ‘Product of USA’ even if the cattle are raised by you. All we ask is for the meat to be repackaged or processed in the US.”
And well, that’s how it is even today.
So yeah, if you’re ever in Switzerland, and find a chocolate that says ‘Made in Switzerland’, you know it’s telling the truth. But if you’re ever in the US and pick up some packaged beef that says ‘Product of USA’, think again. All labels aren’t telling the complete truth.
Until then…
Don't forget to share this article on WhatsApp, LinkedIn and Twitter
PS: Here are a couple of fun facts for all you Toblerone nerds. Toblerone exports 97% of its 7 billion chocolate bars. Also, one Toblerone bar is sold every two seconds at airport duty-free shops around the world.
Ditto Insights: Stop paying your medical bills out of pocket!
2/3rd of all medical bills in India are paid out of pocket. A bulk of it goes to fulfilling expenses related to your hospitalizations.
And it’s wiping out your savings
- You can’t expect to grow your investment if you can’t protect your savings. Even if you start with ₹1 Lakh and compound it by 10% every year, a trip to the hospital can wipe out your gains and your principal in a few short days.
- Medical inflation is growing at over 10% in India: While healthcare procedures have generally become more accessible, a stay at the hospital can set you back quite a bit, simply because the rooms are now expensive. A stay in a single private room in a private healthcare facility in Bengaluru can cost you over ₹10,000 a day. It’s insane.
- No tax benefits: When you’re paying for medical procedures out of pocket, you don’t get to have tax benefits. However, if you have insurance, you can protect your savings, avail tax benefits and beat medical inflation all at the same time. So here’s what you should do. Get yourself a comprehensive medical insurance plan right now before you start your investment journey.
And if you need any help on that front, you can talk to our advisors at Ditto. We only have a limited number of slots everyday, so make sure you book your appointment at the earliest:
- Head to our website — Link here
- Click on “Book a FREE call”
- Select “Health Insurance”
- Choose the date & time as per your convenience and RELAX!
Our advisors will take it from there!
