The Shrinking of Treehorn by Florence Parry Heide is a wonderful story of a child’s experience of reality as the adults ignore his shrinking. Which brings me to the following item (have you noticed?)
But as packaged goods makers’ costs rise, they eventually have just two choices: raise prices or put less stuff in the package. While most are trying a price boost first, a growing number are shrinking the contents of their packages – from Frito Lay’s chips to Dial soap to Dreyer’s ice cream.
“We did not in any way try to hide this,” insists Tim Kahn, CEO of Dreyer’s Grand Ice Cream, which also makes – and has shrunk – Edy’s. “The package-size change couldn’t be any more visible.”
Driving forces behind the downsizing: Commodity costs are way up. Egg prices rose 44.9% from April 2007 through April 2008, reports the Bureau of Labor Statistics. Corn costs rose 69.5%. And wheat rose 96.9%. Energy prices also are up. So are packaging costs.
Typically, shoppers are asked to pay more, but these are not typical times. Raising prices when strapped consumers are price-sensitive can be a formula for disaster. That’s why there’s often less in the box instead.
Update: Economist Mom makes the story so much more articulate for the cognitive crowd. Thanks mom.
I have a different theory. I think the excessive gloominess in the current ”cyclical downturn” is because Americans are feeling as if a good part of the economic downturn might not just be cyclical (temporary)–that much of what we’re seeing in the short-run economy is symptomatic of longer-run challenges that aren’t going to go away within the next few months or even years.
As we fill up our gas tanks each day, do we really think gasoline prices are going to go back to $2/gallon in a few months? As we see our home values–and the equity we can tap into–falling, do we expect to get back to relying on that “wealth” to help pay for our kids’ college educations or our own retirements? As our family budgets are squeezed by rising health care bills and wages that can’t keep up with even general inflation, do we have faith that the government will get that health care inflation under control soon? As my auto-engineer sister and brother-in-law in the Detroit area worry about their job security, do they expect that on the other side of the current downturn, the layoffs will stop? As we hear the bad news about this year’s federal budget deficit, are we comforted by what the presidential candidates are proposing?
Few track this and those who do, such as The Nielsen Co., are tight-lipped about the data except to their clients, who pay big bucks for the proprietary stats. But Nielsen’s executive for consumer insights says up to 30% of packaged goods have lost content over the past year. Some prices went down, others did not.
“I don’t think we’ve seen anything like this since I’ve been in the industry,” says Todd Hale, who has been with Nielsen for 29 years.
In an unscientific visit to a supermarket this month, Lynn Dornblaser, new-products guru at market tracker Mintel, looked at 100 products and found about 10% appeared to have shrunk in contents, but not in price.
Many were from the most familiar brands. Companies don’t like to discuss it, but here are examples:
Less crunch. Since January, Frito-Lay has cut the number of chips in bags across all brands from Lay’s to Doritos, though not all product sizes, spokeswoman Aurora Gonzalez says. The biggest cut was to some 12-ounce bags of chips, which are now 10. Some Frito-Lay offerings got higher prices.
“These are common practices,” says Gonzalez, who faulted rising costs of commodities, energy, production and distribution. “We determined the best actions based on the products.”
Hold the mayo. A jar of Hellmann’s mayonnaise that was 32 ounces is now 30. “The price of our ingredients has gone up dramatically,” says Dean Mastrojohn, a Unilever spokesman. “Manufacturing and transportation costs also have increased significantly.”
Spread thinner. Shedd’s Spread Country Crock was shrunk from 48 ounces to 45, due to higher commodity and energy costs, Unilever’s Mastrojohn says.
Grain shortage. The price of grains has been rising for a while, in part due to increased demand for corn to produce ethanol. Kellogg downsized Frosted Flakes, Rice Krispies and Mini-Wheats in 2006. Boxes shrank from 24.3 ounces to 24 and from 19 ounces to 18. “I am not aware of consumer issues surrounding this downsizing,” spokeswoman Susanne Norwitz says.
General Mills began downsizing cereals last June. Some boxes of Cheerios and Wheaties shrank as much as 1.5 ounces. “Prior to the change, our package sizes were larger, in many cases, than competitors’,” spokeswoman Heidi Geller says.
Such reductions persuaded unemployed Aurora, Colo., resident Susan Kural to switch from top cereal brands to store brands. “Why should I buy 14 ounces when I can get 16?”
Slippery soap. Early this year, Henkel of America downsized its Dial soap bath bar from 4.5 ounces to 4, says Scott Moffitt, Dial’s Personal Care senior vice president.
The decision was primarily due to the skyrocketing cost of tallow, the natural fat from cattle that’s a key ingredient in the soap.
Less bountiful. This spring, Bounty cut the number of towels on a roll from 60 to 52. Procter & Gamble spokeswoman Celeste Kuta says the reduction was because the sheets are now “improved” and thicker.
Buyer beware – of unit price
More than ever, Dornblaser says, consumers need to check the tags on the shelf that list price per ounce, the so-called unit cost, rather than just the total price. “When consumers find it tough to pay bills, one of the things they look at first is what they’re paying for products,” she says.
If consumers want to check to see if they still are getting now what they used to get for their money, self-dubbed supermarket guru Phil Lempert says the best way is to hold onto supermarket register receipts for several months and then compare them. Most receipts not only show prices, but sizes of items.
Lempert says packaged goods makers should have to put the word “new” on the label if they take away even 1 ounce and explain very clearly what was changed.
That’s because a typical supermarket has 50,000 products, while the average shopper spends just 24 minutes getting groceries. “When you’ve got a screaming kid or two with you,” Lempert says, you need a heads-up on product changes.
Few shoppers notice subtle changes in product contents, says Bonnie Tandy Leblang, the syndicated supermarket columnist. “Most just toss things in the grocery cart.”
Have you noticed the difference?