How do consumer packaged goods companies hold the line on prices even when material and fuel costs go up? It's easy — downsize the product package.
As we noted in January, shrinking packages are an all too common outcome of recessionary times, when product manufacturers are squeezed on one end by escalating costs, and on the other by resistance from consumers to pay more for products they favor.
An article in the February issue of Consumer Reports addressed the topic, offering specific examples of product packages that have gotten smaller while the price has remained the same.
The fact is, this practice has been going on for years.
"In every economic downturn in the last few decades," reports the New York Times, "companies have reduced the size of some products, disguising price increases and avoiding comparisons on same-size packages, before and after an increase."
What seems to change, however, is the manufacturers' rationale for the downsizing.
This year, as the Times points out, manufacturers claim various reasons for smaller packaging that are in keeping with current trends — smaller packages are better for the environment, or they are more portable, or they represent fewer calories.
Sometimes the changes are very subtle — a manufacturer shaves off an ounce or two of product contents but retains the same physical package size and price. Consumer Reports cites several product packages that are sold for the same price despite the fact that the content has been reduced, among them: Ivory dish detergent (24 oz. vs. 30 oz. previously), Scott 1000 toilet tissue (104.8 sq. ft. vs. 115.2 sq. ft. previously), and Tropicana Pure Premium orange juice (59 oz. vs. 64 oz. previously).
Other times, the manufacturer may boast about a "new and improved" type of packaging that actually contains less product. Kraft's "Fresh Stacks" packages for Honey Maid graham crackers and Nabisco Premium saltines "has about 15 percent fewer crackers than the standard boxes, but the price has not changed," according to the Times.
John T. Gourville, a Harvard Business School marketing professor, tells the Times the strategy is keyed to consumer perception. "Consumers are generally more sensitive to changes in prices than to changes in quantity. And companies try to do it in such a way that you don't notice, maybe keeping the height and width the same, but changing the depth so the silhouette of the package on the shelf looks the same. Or sometimes they add more air to the chips bag or a scoop in the bottom of the peanut butter jar so it looks the same size."
These days, says Paula Rosenblum, managing partner for retail systems research at Focus.com, manufacturers aren't even being subtle. She tells the Times, "[Manufacturers] announce it as great new packaging, and in fact what it is is smaller packaging, smaller amounts of the product. ... Lately, it hasn't been subtle — I mean, they've been shrinking by noticeable amounts."
Professor Gourville, who traced the trend towards shrinking packages back to the late 1980s, says "it's a continuous cycle," so don't expect the practice of package downsizing to end any time soon.