One way companies are concealing higher prices: Smaller packages

Kleenex. (Mark Lennihan/AP)

Consumers are paying more for a growing range of household staples in ways that don't show up on receipts - thinner rolls, lighter bags, smaller cans - as companies look to offset rising labor and materials costs without scaring off customers.

It's a form of retail camouflage known as "shrinkflation," and economists and consumer advocates who track packaging expect it to become more pronounced as inflation ratchets up, taking hold of such everyday items such as paper towels, potato chips and diapers.

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"Consumers check the price every time they buy, but they don't check the net weight," said Edgar Dworsky, a consumer advocate and former assistant attorney general in Massachusetts, who has been tracking product sizes for more than 30 years. "When the price of raw materials, like coffee beans or paper pulp goes up, manufacturers are faced with a choice: Do we raise the price knowing consumers will see it and grumble about it? Or do we give them a little bit less and accomplish the same thing? Often it's easier to do the latter."

Such cutbacks, economists say, typically coincide with economic downturns, when shoppers tend to be more mindful of cost. There was similar product shrinkage during the 2008 recession, according to John Gourville, a marketing professor at Harvard Business School.

The latest round of downsizing comes as Wall Street is on high alert for signs of sustained inflation. The combination of super-low interest rates and aggressive fiscal spending under the Biden administration has led some economists, including former treasury secretary Lawrence H. Summers, to warn of possible economic overheating.

Slimmed-down product sizes are reflected in government inflation data to some extent, according to Jonathan Church, an economist with the consumer price index program at the Bureau of Labor Statistics. Though the bureau's ability to weigh items has been limited during the pandemic because of restrictions on in-person data collection, he said there has been a marked shift toward smaller packages of chips and other snack foods.

For Michael Jewsbury, shrinkflation arrived in the form of cat food. Without warning late last year, his standard order for Royal Canin was filled with 5.1-ounce cans instead of the usual 5.9. But Chewy.com, his provider, continued to charge him the same $81 for his biweekly order.

Both he and his 16-year-old cat Maurice immediately noticed.

"It just showed up at my doorstop in a smaller size," said Jewsbury, 44, of Collingswood, N.J., who estimated the change would set him back more than $240 a year. "There was no explanation, no notification. It really bugged me."

Royal Canin, a subsidiary of the packaged goods giant Mars Inc., said it reduced some product sizes "to keep up with unprecedented demand" for pet food during the pandemic, including the wet mixture of rabbit liver and pea flour that Jewsbury purchased for his now-deceased Russian Blue cat.

"The cans remained the same price, as the difference in amount of product is not significant and rarely impacts the number of cans being fed to the cat," Roland Hooley, a company vice president, said in a statement.

The company is among a host of manufacturers and retailers unable or unwilling to absorb higher manufacturing costs. Kimberly-Clark has said it will raise prices on Scott toilet paper, Huggies diapers and other everyday goods by 4 to 9 percent beginning this month. Scotts Miracle-Gro will follow suit this summer, while Procter & Gamble, the maker of Pampers and Tampax, has said it will mark up prices in September.

"Every raw material we're buying right now is at a materially higher cost than we planned," James Hagedorn, chief executive of Scotts Miracle-Gro, said on an earnings call last month. "Distribution costs are higher, too. So we're going to do what we need to . . . to keep our business healthy."

Costco executives said last week they were paying higher prices for inventory - as much as 20 percent more for beef, for example, and up to 10 percent more on clothing. Though the warehouse chain has so far shouldered most of those increases, along with rising costs for freight, transportation and labor, Chief Financial Officer Richard Galanti said it may have to raise prices on such staples as its $4.99 rotisserie chicken or 40-pack of bottled water, now $2.99, to maintain profit margins. "Inflation pressures abound," he said in an earnings call.

Consumer prices rose 4.2 percent in April from a year earlier, led by double-digit jumps in gasoline and used cars, according to the government's consumer price index. A separate measure of inflation released Friday showed a comparable jump, though Fed officials say those figures will ease as pandemic-related supply constraints fade.

In the meantime, product sizes are shrinking - even if it isn't always evident. Many manufacturers, experts said, keep packaging the same height or general shape to avoid drawing further attention to the changes.

Walmart's Great Value paper towels, for example, went from 168 2-ply sheets per roll to 120. The price, at $14.97, remained the same for a dozen rolls despite the nearly 30 percent drop in product. Both versions remained listed on the retailer's site until last week.

A company representative said the change was the result of a product upgrade, but did not provide additional details.

"Most people know more or less what a box of cereal - or a container of ice cream or a package of coffee - should cost," said Gourville of Harvard. "But ask them how much is in a box, and they're relatively clueless. That's not something they pay attention to."

Since the 1970s, he said, conventional packages of coffee have gradually slipped from 16 ounces to about 12. Standard sizes for tins of tuna, cans of tomatoes and bottles of orange juice have all gotten smaller, too. Even the bar of Dial soap Gourville has been using for decades has become more concave, he said, in a bid to disguise its shrinking form.

Henkel Corp., which manufactures Dial, did not respond to a request for comment.

Shoppers' propensity to focus on cost over quantity, he said, also explains pricing conventions around the supermarket: Craft beer generally comes in four-packs instead of the traditional six, which would appear too pricey. At the deli counter, cured salmon is typically priced by the quarter-pound, instead of the pound measurement used for more inexpensive cuts of meats like ham or turkey.

"You might be willing to pay $9 for a quarter-pound of lox, but if the sign says '$36 per pound,' you would be aghast at how expensive it is," he said. "Companies are constantly playing around with prices."

Often, branding experts said, companies pass off shrinking product sizes as packaging innovations. Hershey's, for example, shaved off nearly 2 ounces from its 18-ounce packs of its dark chocolate Kisses - but kept the list price the same - as part of a 2019 makeover that swapped out its "traditional lay-down bags" for a pricier resealable, stand-up pouch.

Casey Geib, a senior director at the Hershey Co., said "consumer insights" led to the new, more expensive packing. "We spent time understanding how consumers used this type of package, where they stored it, how they opened it," he said.

Once a brand downsizes, competitors typically follow, said Dworsky, the consumer advocate in Massachusetts who now runs consumerworld.org. Shoppers tend to compare the price of products that appear to be the same size, he said, without stopping to distinguish between a jar of peanut butter with 16 ounces and another with 15.

"As consumers, we are not completely rational: The one piece of numeric information people are sensitive to is price," said Julio Sevilla, a marketing professor at the University of Georgia's Terry College of Business, whose work focuses on packaging and consumer behavior. "Size matters less."

Tillamook County Creamery Association, a farmer-owned cooperative in Oregon, reduced its family-size containers of ice cream from 56 ounces to 48 ounces earlier this year, bringing it on par with its competitors. The price, though, remained the same at about $6.

The change, chief executive Patrick Criteser said, had been in the works for a year and half. The last time the company raised prices was 2014. But most of its costs have risen since then, he said, including manufacturing and freight (which is up by 50 percent), labor and benefits (30 percent) and ingredients (20 percent).

"We held onto bigger sizes for as long as we could, but at some point we decided we have to be able to make money to pass it on to the farmers who own the company, so they can stay in business," Criteser said.

The industry standard, he added, went from 64 to 56 ounces in the early 2000s, then dropped to 48 ounces around 2008, tracking downturns in the broader economy.

But now, he said, costs are ticking up again as the industry grapples with pricier raw materials and packaging, as well as a shortage of manufacturing workers and truck drivers.

"We've seen costs rise before," he said, "but we've never seen it happen so rapidly and all at the same time."

Colin Booth, a political consultant in Concord, N.H., who is partial to Hefty's tall kitchen trash bags, noticed last fall that the brand's "mega pack" went from 90 bags to 80, while the price remained the same.

Hefty's parent company, Reynolds Consumer Products, did not respond to requests for comment.

"I was home during the pandemic and, like a lot of people, was laser-focused on what I could and couldn't get at the grocery store," the 35-year-old said. "So when the box suddenly went from one round number to another, I just thought, 'Well, will you look at that?'"

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