Products shrink as costs rise

Products shrink as costs rise

Consumers are paying more for a growing range of household staples in ways that don’t show up on receipts — thinner rolls, lighter bags, smaller cans — as companies look to offset rising labor and materials costs without scaring off customers.

It’s a form of retail camouflage known as “shrinkflation,” and economists and consumer advocates who track packaging expect it to become more pronounced as inflation ratchets up, taking hold of such everyday items such as paper towels, potato chips and diapers.

“Consumers check the price every time they buy, but they don’t check the net weight,” said Edgar Dworsky, a consumer advocate and former assistant attorney general in Massachusetts, who has been tracking product sizes for more than 30 years. “When the price of raw materials, like coffee beans or paper pulp goes up, manufacturers are faced with a choice: Do we raise the price knowing consumers will see it and grumble about it? Or do we give them a little bit less and accomplish the same thing? Often it’s easier to do the latter.”

Such cutbacks, economists say, typically coincide with economic downturns, when shoppers tend to be more mindful of cost. There was similar product shrinkage during the 2008 recession, according to John Gourville, a marketing professor at Harvard Business School.

The latest round of downsizing comes as Wall Street is on high alert for signs of sustained inflation. The combination of super-low interest rates and aggressive fiscal spending under the Biden administration has led some economists, including former Treasury Secretary Lawrence H. Summers, to warn of possible economic overheating.

Slimmed-down product sizes are reflected in government inflation data to some extent, according to Jonathan Church, an economist with the consumer price index program at the Bureau of Labor Statistics. Though the bureau’s ability to weigh items has been limited during the pandemic because of restrictions on in-person data collection, he said there has been a marked shift toward smaller packages of chips and other snack foods.

For Michael Jewsbury, shrinkflation arrived in the form of cat food. Without warning late last year, his standard order for Royal Canin was filled with 5.1-ounce cans instead of the usual 5.9. But Chewy.com, his provider, continued to charge him the same $81 for his biweekly order.

Both he and his 16-year-old cat Maurice immediately noticed.

“It just showed up at my doorstop in a smaller size,” said Jewsbury, 44, of Collingswood, N.J., who estimated the change would set him back more than $240 a year. “There was no explanation, no notification. It really bugged me.”

Royal Canin, a subsidiary of the packaged goods giant Mars Inc., said it reduced some product sizes “to keep up with unprecedented demand” for pet food during the pandemic, including the wet mixture of rabbit liver and pea flour that Jewsbury purchased for his now-deceased Russian Blue cat.

“The cans remained the same price, as the difference in amount of product is not significant and rarely impacts the number of cans being fed to the cat,” Roland Hooley, a company vice president, said in a statement.

RISING COSTS PASSED ALONG

The company is among a host of manufacturers and retailers unable or unwilling to absorb higher manufacturing costs. Kimberly-Clark has said it will raise prices on Scott toilet paper, Huggies diapers and other everyday goods by 4% to 9% beginning this month. Scotts Miracle-Gro will follow suit this summer, while Procter & Gamble, the maker of Pampers and Tampax, has said it will mark up prices in September.

“Every raw material we’re buying right now is at a materially higher cost than we planned,” James Hagedorn, chief executive of Scotts Miracle-Gro, said on an earnings call last month. “Distribution costs are higher, too. So we’re going to do what we need to … to keep our business healthy.”

Costco executives said last week they were paying higher prices for inventory — as much as 20% more for beef, for example, and up to 10% more on clothing. Though the warehouse chain has so far shouldered most of those increases, along with rising costs for freight, transportation and labor, Chief Financial Officer Richard Galanti said it may have to raise prices on such staples as its $4.99 rotisserie chicken or 40-pack of bottled water, now $2.99, to maintain profit margins. “Inflation pressures abound,” he said in an earnings call.

CONSUMER PRICES UP

Consumer prices rose 4.2% in April from a year earlier, led by double-digit jumps in gasoline and used cars, according to the government’s consumer price index. A separate measure of inflation released Friday showed a comparable jump, though Fed officials say those figures will ease as pandemic-related supply constraints fade.

In the meantime, product sizes are shrinking — even if it isn’t always evident. Many manufacturers, experts said, keep packaging the same height or general shape to avoid drawing further attention to the changes.

Walmart’s Great Value paper towels, for example, went from 168 2-ply sheets per roll to 120. The price, at $14.97, remained the same for a dozen rolls despite the nearly 30% drop in product. Both versions remained listed on the retailer’s site until last week.

A company representative said the change was the result of a product upgrade, but did not provide additional details.

“Most people know more or less what a box of cereal — or a container of ice cream or a package of coffee — should cost,” said Gourville of Harvard. “But ask them how much is in a box, and they’re relatively clueless. That’s not something they pay attention to.”


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