Excerpted from the Minneapolis Star Tribune, “Freshly squeezed: The ever shrinking box and carton” by Chris Serres, December 2, 2008
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In the past year, thousands of small, almost imperceptible changes swept through the grocery aisles where American families shop each day.
The indented bottom of a Skippy peanut butter jar got more indented, turning an 18-ounce jar into a 16.3-ounce one. Ice cream containers shrank by one-quarter of a quart. And for breakfast, a jug of Tropicana orange juice got 7 ounces lighter while that box of Froot Loops lost more than 2 ounces.
Shoppers without a keen eye and a willingness to read the fine print on labels might have missed what has happened: Food manufacturers were downsizing packages, while keeping prices the same, as they passed on higher food costs to consumers.
According to a recent analysis by Nielsen Co., about 30 percent of all packaged goods have “lost content” over the past year. This at a time when U.S. grocery bills are rising — up 7.5 percent in October vs. the same month a year ago — at the fastest rate in 18 years.
What began as a response to rising fuel and ingredient costs has become institutionalized at many companies. At General Mills, for example, cost-cutting is so embedded that the company even has its own intimidating term for it: “Holistic Margin Management.”
It’s not always about shrinking packages, which can account for as much as 75 percent of a product’s cost. Even seemingly small changes in a package’s design can mean millions of dollars in annual savings — lessening pressure to raise prices to cover costs.
There is an entire science behind packaging reductions, enlightened by a long list of unsuccessful changes.
For instance, food manufacturers know consumers react more to changes in height than width, so cereal boxes often get thinner before they get shorter.
Once a product changes, buyers often forget the previous size, creating a new standard.
When PepsiCo reduced the size of its Tropicana orange juice jug by 7 ounces, it touted the container’s “new ergonomic design” and easy-to-open snap cap. Yet consumer advocates argued the new features were really meant to distract from the reduced weight.
“This is the packaging equivalent of three-card monte … by changing several factors at the same time, food companies disguise the fact that you’re getting less for the same price.”
One reason food companies have gotten away with downsizing without alienating shoppers is that over the decades fewer people are preparing meals at home. So they pay less attention to measurements on packages, said John Gourville, a marketing professor at Harvard Business School.
“The reality is, people pay more attention to prices than sizes … and the food companies know it.”
“You can take an ounce out here and an ounce out there, and maybe people won’t notice,” he said. “But if you do it repeatedly, and people are only getting three servings per cereal box, then people are much more likely to say, ‘What’s going on here?’ And it gets harder and harder to do.”
Edit by NRV
Full article:
http://www.startribune.com/business/35343634.html
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Ken’s Take: You have to sort this marketing approach into 3 parts: (1) more effective packaging — e.g. more merchandising impact, better ergonomics (2) cost-cutting — e.g. more efficient use of volume and space, and (3) higher prices — e.g. on a per ounce basis. Re: the latter — it is usually easier to raise “unit prices” by resizing than by changing the price “per package”
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Sam’s developed a new milk jug that is stackable, so Sam’s can get 400 additional jugs in a trailer, eliminating 11,000 delivery trips to the stores. And, there are no carts to send back to the dairy.
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