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Sunday, April 3, 2011

Same price but less product?

Recently, an article from The New York Times mentioned that many companies are putting less products in their bags/packages but keeping the prices the same in order battle price increases. Is food inflation here? The article mentions one shopper who said she began inspecting her other purchases, aisle by aisle. Many canned vegetables dropped to 13 or 14 ounces from 16; boxes of baby wipes went to 72 from 80; and sugar was stacked in 4-pound, not 5-pound, bags, she said.

Being in the CPG industry, I can relate to this. We have taken price increases on certain items in order to keep up with increasing costs related to the raw materials. Although it's not that noticeable in household goods, I think when people are grocery shopping for food items it is more obvious. Companies aren't going to advertise that the prices are staying the same but customers are getting less. However, there are "creative" ways of marketing the new changes such as promoting the fact that snack sizes may be more healthy a.k.a. 100 calorie packs or emphasizing how the packaging may be more green and smaller etc.

Kraft's CEO even mentioned that the company must closely watch the rise in commodity prices. Whether they introduce smaller packages, smaller serving sizes or begin lowering costs across the chain there is no doubt that companies will start to be more conscious about costs and portions in each item they sell.

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