Downsizing - Employees AND Customers

Last semester I was discussing pricing in my marketing course, and I asked students to compare packaging sizes for some CPG items and the changes in unit prices over the past year. The students then observed the subtle changes in package quantities. In my marketing courses we discuss pricing strategies and the benefits, in a recessionary environment, of holding prices steady but improving the margin by reducing package sizes. While painful to my wallet, it was pleasing to see my former students put this strategy to good use. Of course, downsizing the employees is another way to improve the operating margin.

Downsized! More and More Products Lose Weight

by Consumer Reports staff

more-and-more-products-lose-weight: Personal Finance News from Yahoo! Finance: "From toothpaste to tuna fish, hot dogs to hand soap, companies have been shaving ounces and inches from packaged goods for years, usually blaming it on rising costs for ingredients and energy. They've got a point: Higher commodity and fuel costs are expected to cause a spike in food prices by as much as 3 percent in 2011. But if manufacturers are skimping when costs go up, why aren't they more generous when costs hold steady or fall?

No one likes a price hike, but what riles readers are the ways manufacturers hide their handiwork: indenting the bottom of containers (a favorite trick among peanut butter processors), making plastic wraps thinner, or whipping ice cream so that you pay for air instead of ingredients"

Reasons For Reduction

Those moves may fool some people, but most have caught on. In a Consumer Reports survey several years ago, three-quarters of Americans said they noticed that packages were shrinking, and 71 percent of those people theorized that the main reason was to hide a price hike. Yet half said they'd prefer that companies keep the old package and raise the price. So why don't they?

"Because people are much more conscious of price than they are of package size or net weight of contents," says Edgar Dworsky, editor of Mouseprint.org, a blog that examines advertising's fine print. Slight downsizing is often imperceptible, whereas price increases are about as subtle as a pie in the face. And when prices rise, buyers often seek cheaper alternatives.

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Despite awareness of downsizing, it's not easy to figure out which products have shrunk because relatively few packaged goods come in standard, recognizable sizes anymore. Tropicana and Florida's Natural, for example, shaved 5 ounces off their half-gallon cartons of premium orange juice. Häagen-Dazs, citing "ingredient" and "facility" costs, put its ice cream pints on a diet, knocking them down to 14 ounces. Other products come in such a range of sizes that it's hard to tell when one of them shrinks. Oreos, for instance, come in more than a dozen packages weighing from 2 ounces to more than 50 ounces.

What You Can Do

• Look at different brands. Not all competitors act in lockstep. Minute Maid still sells its orange juice in half-gallons, and Ben & Jerry's packs its ice cream in pints. In addition, companies don't always downsize every package in their lineup.

• Compare unit price (per ounce, per quart, per pound, or per sheet) of package sizes. Promotions change, making one size or another cheaper from week to week.

• Try store brands. They're usually 25 to 30 percent cheaper than name brands and are often at least as good, we've found.

• Stock up and save. Supermarkets sell staples such as paper goods, cereal, and soups at or below cost to draw you in. Those "loss leaders" rotate regularly. If you follow flyers, you'll see that many items go on sale at predictable intervals, letting you stock up until the next sale.

• Buy in bulk. Warehouse clubs offer everyday low prices on large sizes or multipacks, so you don't have to wait for a sale.

• Contact the company. When we asked customer-service representatives why a product had been downsized, we were often given coupons toward our next purchase.

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If enough people complain, companies may actually listen. Virginia reader Glenn Tonnesen thought Pepperidge Farm was trying to pull a fast one by labeling its German Dark Wheat bread "New Size, New Price." The old loaf weighed 24 ounces and cost $2.66 per pound; the new was 18 ounces and $2.92. The message, Tonnesen suggested: "We made it smaller, but that's OK because we made it more expensive!" Pressured by consumers unhappy with the lithe loaf, Pepperidge Farm brought back the larger one, briefly. It has since been discontinued.

Items That Shrank

Ivory Dish Detergent

Old: 30 oz.
New: 24 oz.
Difference: -20%

Reason: Reason The 30-ounce product was discontinued in smaller stores, due to increased costs for raw materials.

Tropicana Orange Juice

Old: 64 oz.
New: 59 oz.
Difference: -7.8%

Reason: Last winter's freeze in Florida. The choice was to raise prices drastically or drop package size. Based on consumer research, people preferred to keep the same price and get a little less juice to keep within their budgets.

Kraft American Cheese

Old: 24 slices
New: 22 slices
Difference: -8.3%

Reason: The larger 16-ounce package was discontinued because it wasn't selling.

Kirkland Signature (Costco) Paper Towels

Old: 96.2 sq. ft.
New: 85 sq. ft.
Difference: -11.6%

Reason: "It's a good question. I'll look into it and e-mail a response." (We never got one.)

Häagen-Dazs Ice Cream

Old: 16 oz.
New: 14 oz.
Difference: -12.5%

Reason:Due to the cost of ingredients and facility costs, it was either change the size of the container or raise the price.