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Friday, December 24, 2010

Food Price Inflation Hidden in Packaging



Food Price Inflation. How long can food companies continue to hide inflation using their food packaging schemes?
It seems to us, at least where we live, that not only are food prices in general continuing to creep higher, but the packaging is cleverly getting smaller.
It’s almost like the reverse of how you don’t seem to notice your child growing bigger and taller, because it happens so slowly. Then one day, you suddenly notice how junior has grown.
Well, conversely, junior is shrinking when it comes to food packaging. Every once in a while, when grocery shopping, you pick up that package of xyz and you say to yourself, this box seems smaller than before!

The other day while shopping, I had noticed a brand of peanut butter that I had not seen displayed in a long time. Since I remember that I liked the taste of that brand years ago, I decided to splurge and buy it to see if it still held up to my recollection. I remarked to my wife how the price seemed not bad… until I picked it up and realized that the jar was smaller than it should be for that typical size-range that we were used to. I instantly could “tell” that the diameter of the jar was smaller than before.

Foods used to be packaged in sizes that were “even” ounces, or whole-number sizes that made sense like 16 oz. or 12 oz. etc…
Now, not only are there all sorts of odd sized packaging, but now you commonly see decimals! What is the sense of 14.3 ounces? The answer is, it makes sense to the bean counters at the food corporation to increase their profit margin, or to keep up with their own increased costs of production! Most likely that product used to be in a 16 ounce package. Packages are getting smaller and smaller.

Now lets do the math. Lets say that product xyz is priced $3.00, same as it was 4 months ago. However instead of being packaged in a 16 ounce container, now it is only 14.3 ounces. Some people may not even notice the small change in weight because of the clever way that the container and label are redesigned to “appear” that it hasn’t changed. Clever corporate marketing.
Well, that difference in weight (1.7 ounces) equals a 10 percent food price increase! Even with only a 1 ounce reduction of a 16 ounce package equals a 6 percent food price increase! This is a major way in which food companies have been hiding food price inflation.

Now, not only are the packages getting smaller, but they are raising food prices. That $3.00 xyz product not only went up 10 percent because of a downsized package, but they raised the price to $3.29, an 8 percent increase! Between the packaging change and the price increase, the food price has gone up 18 percent!
Another way of saying this is that the purchasing power of your dollar has decreased by 18 percent.

Now that we see what is happening with food prices, what is the best thing we can do?
Answer: Be aware of the corporate schemes and buy more food now, rather than later, because this will not stop.

The current economic mess and massive debt load of the USA and many other countries of the world is resulting in a purposeful faster devaluation of the currency. Without getting into the details of that, suffice it to say that inflation is here, and is going to get much worse in the future.
Stock up on food now. It makes financial sense. It makes preparedness sense.

Corporate scheming, trimming, squeezing, downsizing, profit optimizing, is nothing new. With regards to food packaging however, and although some may argue that food price inflation is tame, in my opinion the pace has increased of late, or at least I’m noticing an increase – like realizing that junior is growing up…
One danger I worry about with regards to foods and corporate optimization, are the substitutions that are put in food products in place of “real” food substances. We know it’s happening, and despite what the FDA says, it can’t be good. But that is for another post.
Most of us are used to seeing the “tags” on the grocery store shelves with the food, the ones that sometimes show price per unit. I say “most of us” and “sometimes” because it is not always the case. Evidently laws vary from state to state and certainly from country to country. All you can do is the best you can, try to determine the price per unit to compare and find a best deal.
Having said that, I have seen tags that indicate price per ounce (I like that) while others indicate price per serving (I do not like that), and still others do not indicate a price per unit at all (I definitely don’t like that). Foods priced on servings vary wildly and require a calculator to figure it all out at the grocery store – how annoying.
Soon enough, peanut butter will be sold in one-serving squeeze tubes instead of 18 ounce jugs, but will still cost you $3.00. That goes for the other food stuffs too (just using PB because it’s what set me off this weekend).

See who controls the food supply: List of Top 50 Supermarket Grocery Chains

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  1. Yes it is absolutely true that this downsizing of packages is inflation. I think you miss the mark to simply blame the companies making and selling the food though. Clearly their costs are up so the prices must go up. Should they have simply increased the price and not made a change in the package size? Sure! I would have preferred that. But instead some marketing weanie made the decision probably because it allows them to compete more effectively. But nothing would have been different then if they had just increased the price to cover the costs. So the bottom line is that costs are going up and the companies are passing it along. Of course! What else is new! We would do the same in the same situation. A better use of your time and space on your blog would be to address how the stupid subsidy for ethanol from corn has increased the cost of food. How our government rapes us twice by giving the ethanol industry massive amounts of our tax money and the ethanol industry uses it to turn food into alcohol.

  2. My family has been in the grocery business since the 40's - have seen just about everything come and go. And while I agree with the premise about package size/price, the conclusions just aren't borne out by the facts. The package size issue isn't happening because Jif is trying to scheme itself more money, it's happening because the vast majority of people, somewhere in the 80%+ range, make purchasing decisions not by price per ounce, but by package price. There have been an untold number of studies in the psychological economics field on the phenomenom, and we see this daily in my family's grocery store. Now the real reason they do this is because the peanuts and sugar are costing more, oil prices have an effect on everything - their price for peanut butter has to reflect those increases or there won't be any peanut butter. They make a smaller package size to keep the price stable, because if their price goes up, people will switch to another brand most likely of lower quality. Remember the big peanut butter recall a few years ago? Low quality. Notice how that recall didn't effect Jif and Skippy? It really isn't a big conspiracy, it's a company trying to stay in business. Also, the attached graph may be factually true but there are a few problems with the conclusions - those companies have that much revenue - but that's not what their actual "take home" is. Those are gross numbers (and in the cases of Walmart and Target those numbers also include their non-food items). What they actually make is between 1 and 5% of that. Still not a small amount I know. Another problem with the graph - included are food distributors like Super Valu. The numbers you see there include wharehouse sales to individual retailers as well as individual family owned stores like that of my family.

    To say stay away from chains in basically meaningless nowadays - you could look at our store and conclude it's part of a chain because of it's name, but it's a franchise. A local family owned small business. 84% of our sales stay in the local economy, whereas only 17% of Walmart/Target sales stay in the local economy. Your best bet is to stay away from *corporate* chains like Walmart, Target, Publix and Kroger. That money leaves the area and some suit in another state is effecting your food budget. But if you shop at a locally owner grocer, no matter what the sign says outside, that money stays local and will find its way back to you.

    And lastly, retailers simply do not control the food supply. Look to agri-business for that. Cargill, ADM and Monsanto - they control the actual food: if they don't produce it, you can't buy it. If they decide GMO is more profitable, that's what you're gonna eat. If they want to irradiate meat because it's more cost effective then maintaining a clean slaughterhouse floor, you'll be eating irradiated meat. That's the real crime, not price per ounce.

    Buy local, from family owned businesses who have the contacts with local growers of your lettuce and beef. Shop the perimeter of the store - produce, bakery, dairy, meat and stay away from the boxed/canned goods. You will save money, you'll be buying locally grown produce and locally raised meat and if enough people do this, we can cut Cargill and Monsanto out of the loop and get back to real food at real prices, and save the family farm.

  3. Part of life has taught me to be vigilant, keenly aware, alert, and pay attention.

    Over the years I've noticed packages getting much smaller. Not only that, the contents have shrunken considerably with the excuse "contents may have settled during shipment" or something of that nature.

    I'd be willing to be the device used in quantifying contents is "compromised" at the very least.

  4. Excellent post and excellent comments by Tippy and Anonymous.

  5. I have spent over 30 plus years in the grocery industry managing for large chains to owning my own store. This shrinking of packaging started back in the seventies by the big P&G boys with diapers and it has been going on ever since. And I agree not many shoppers look at the price per ounce or pound but rather the price per unit.

    Just want to ad great site you have here I hope it is doing what you want it to do.

  6. This is so true. I have noticed this happening in a lot of things. The price stays the same but you get less.