It's only a reduction of 6.993%, but it's better than nothing

Lingonberry Fruit Spread display at IKEA

Ligonberry Spread "New lower price" sign

Lingonberry Fruit Spread jar

Price reduction on the shelf tag

Sunday afternoon I was at IKEA. (More wooden hangers for my kid's closet.) I saw this sign in the Swedish Marketplace section.

A price reduction, not a huge one, but a price reduction nevertheless. Given the recent new about inflation, any price reduction is worth shouting about. And in addition to the price reduction, the product had a pretty prime spot and there was lots of stock on the floor.

But the price reduction didn't change my buying behaviour. (Already had a full jar at home. Didn't need another one just yet.)

 

Smaller packages and lower costs

Jelly bean packaging, Dollarama

Jelly bean packaging, Dollarama (Reverse)

In recent years the packages of many foods have decreased in size. This "inflation by stealth" has occurred across a broad range of consumer packaged goods.

But here is a case where the package gets smaller, but actually does not change size. Based on the "Best before" dates on the back of these bags of jelly beans, I presume that the shorter bag on the left is the new one. (2017 date) while the taller bag on the right is the old one (2016 date)

The remarkable thing is that both bags contain 250 grams of jelly beans. The smaller bags will take up less space in shipping and storage, Lower costs and more space in the store. And best of all, the customer is not getting stiffed.

Inflation by stealth

Package of doughnuts from Walmart

Package of doughnuts from Walmart (Detail)

According to the Bank of Canada the current inflation rate, May 2015, is 2.2%. (Source: http://www.bankofcanada.ca/rates/indicators/capacity-and-inflation-pressures/) Yet some observers have noted that the price increases are actually much higher. Some of the price increases are easy to see. When the price of gasoline goes from $1.10 per litre to $1.30 per litre the price increase in undeniable.

Yet other price increases are less noticeable. Walmart sold a box of a dozen muffins for $4.00. Walmart still sells a box of a dozen muffins for $4.00. The inflation is reflected the number of muffins and thus the cost per muffin. The new box only contains nine (9) muffins, so a price increase of 25%. Peek Freans did it with cookies reducing the number of cookies while keeping the box the same size and going from 350 grams to only 300 grams

2013 Packaging

2014 Packaging

Coca-Cola has done it with the personalized bottles of Coke changing the size from 591 millilitres to 500 millilitres.

Yes it is a small detail, but one that leads to higher prices for consumers and higher profits for brands and retailers.

Is inflation over 11%? It is here. And I wonder what effect the price increase will have?

Sandwich board outside The Pizza Stop, Seymour Street, Vancouver, BC

Business students learn about the 4Ps of marketing in their first marketing class. Of the 4Ps; product, price, promotion, and place, price is the one that consumers notice first.

At this pizza place the price for two slices and a can of soft drink has just gone up by 11.11%. The tax-in price used to be $4.50, now it is $5.00.

According to the staff the price rise is due to an hike in the rent and inceasing food costs, especially cheese. Will this make a difference in sales? I think that is unlikely. But it will make a change in the tips. If a customer buys two slices and a can of C Plus, the bill now comes to $5.00 even. Will they fish in their pocket for a couple of quarters for a tip? A lot less likely than when they got two quarters back in their change.

So, this may actually result in less cash in hand for the restaurant and its staff. Oh the weird and wonderful world of microeconomics.

When is a price increase not a price increase?

Sun-Rype 100% Juice, Apple Lime flavour - New 900 ml packaging

Sun-Rype 100% juice, Apple flavour - Original 1 litre packaging
(Source: http://upload.wikimedia.org/wikipedia/en/8/8a/Sun-Rype_Apple_Juice.JPG) 

I've written about this before, and I'll probably write about it again. Consumer are facing a bit of stealth inflation from consumer packaged goods (CPG) firms.

Sun-Rype has changed the packaging of its 100% juices from a 1 litre (1000 ml) package to a 900 ml package. So, 10% less and as the new package is taller than the old package most consumers probably won't realize that the amount they get in the box has changed.

Consumers who don't pay attention to packaging and labeling are their own worst enemies, and a staggering portion of consumers seem to be oblivious to the changes, or are unwilling to complain.

And as long as the complaints are low in number packaged goods firms will keep trying these sorts of moves.

Why can't I compare coffee?

If you were a consumer, how would you compare the prices if none of the products were packaged in the same size container.

I was recently at my local grocery store and found coffee sold in the following size packages.

• 56 grams
• 56.7 grams
• 100 grams
• 150 grams
• 200 grams
• 225 grams
• 226 grams
• 250 grams
• 260 grams
• 275 grams
• 280 grams
• 292 grams
• 311 grams
• 312 grams
• 326 grams
• 340 grams
• 343 grams
• 400 grams
• 454 grams
• 500 grams
• 584 grams
• 737 grams
• 907 grams
• 910 grams
• 925 grams
• 930 grams
• 975 grams
• 1000 grams

Some of the packages size are conversion from imperial measures, 454 grams is one pound, 907 grams is two pounds etc. Some of the other odd measure are also conversions from ounces.

But as a consumer, the confusing proliferation of sizes make price comparison all but impossible.

At one time coffee in North America was sold in one pound packages, but those days seem long gone. So, there must be some logic behind the proliferation of sizes.

Like most things in the grocery store, the price of coffee has been creeping up recently. And one response to increasing prices is to decrease the size of the package. The retail price remains the same, but the consumer just gets a bit less. And if the change in package size is accompanied by a redesign, many manufacturers think that they can pull a fast one on the consumer.

Are consumers that unaware? Well lots of them must be, or they would rebel and manufacturers would not try such tactics.