A new kind of retail shrinkage hits consumers instead of retailers

In a classic Seinfeld episode, Jerry and friends are staying at a beach house with people they don’t know well. George is changing his clothes and a woman walks in on him, looks down at his crotch, bursts into laughter, and runs from the room, with George yelling after her, "I was in the cold water! It’s shrinkage!"

While "retail shrinkage", the technical term for inventory loss occurring inside the store, is a universal problem, another kind of shrinkage stands to harm brands more than retailers... Like a dose of cold water on consumer pockets, another new trend in retail survival is package "shrinkage." A number of grocery products have been "outed" recently for the less-than-overt practice of making the contents slightly smaller and charging the same price, counting on the fact that consumers won’t really notice why the cereal or ice cream is running out a little faster than it used to. The amount is often slight -- a few ounces here, a few grams there -- but almost all the manufacturers have been very quiet about these changes. (Honestly, not that we expect them to brag about making things smaller when the trend has always been Bigger is Better. But it'd still be nice to know!) For the most part, it’s a lot easier to do this quietly rather than announce to consumers that prices are going up. And inevitably in the food industry, they are going up.

Consumer watchdog Mouse Print points out the Kellogg’s cereal has shrunk the box and reduced the calories on Apple Jacks, Corn Pops, and Fruit Loops, among other cereals. At least Kellogg’s is honest, including a little box on the side explaining why:

"This package change is considered a price increase, in that box size is smaller. The reason for the price increase is the rising costs of ingredients and transportation."

Ice cream has been a big culprit – dairy prices are way up and transportation and refrigeration depend on energy costs. Mayfield Dairy decided to tie the package shrinkage to their premium line of “select” flavors.

"With the price increases we are seeing in cocoa, nuts and dairy ingredients, we are facing a substantial price increase," said Scottie Mayfield, president of Mayfield Dairy. "Instead of raising our price, we have chosen to reduce the package size by 8 ounces."

Here’s another one: Earlier this year, Dial Soap shrank from 4.5 to 4 ounces. Who would expect tallow (cattle fat) to get more expensive, too? In this case, the new size was marketed as streamlined packaging (getting a grip on Dial for Men).

Although consumer watchdog groups and blogs have been commenting on the package shrinking issue for a while now, there’s not much industry tracking of the effect on consumers and spending. The Nielson Co. has information for their clients, but they’re not sharing it with the rest of us. One estimate was as many as 30% of packaged goods have gone to smaller sizes in the last year, but that data doesn’t tell us whether the price went up, down, or stayed the same.

The solution, unfortunately, for consumers, is to check the unit cost (price per ounce) on the things they buy. One analyst even recommends saving your cash register receipts and comparing them over months --- to use the point-of-sale data yourself rather than let the industry have all the fun. But that’s time consuming, and let’s face it, I'm not sure consumers want to extend the duration of their "retail experience" just to find out that they're paying more for everything anyway.

At the same time, I’m wary of encouraging marketing folks to give this a positive spin – like George and the laughing woman, it may be a futile exercise in damage control. Or worse, tied to questionable tactics: I can just see the tie-in to anti-obesity campaigns (shouldn’t we all be eating less anyway?) or environmental concerns (smaller packages mean less waste!). It’s hard to convince people things are better for them if they’re paying more for it, especially when we’re talking about staples like groceries. Americans in particular are used to spending a very small percentage of their income on food in comparison to people in the rest of the world. Like higher gas prices, higher food prices will require some adjustments from everyone, from the farmer to the producer to the retailer all the way to the consumer. I don’t particularly like paying more to keep the pantry full, but it’s one of the last things I’m going to sacrifice in my budget-trimming. I’m already buying the less expensive brand of shampoo, the generic household cleaners, and clothes on sale. And if I’m buying less at the grocery store, I’m still buying the things I think are essential, delicious, and part of our regular meal patterns. Isn’t that a kind of brand loyalty?

So here’s a novel idea for package shrinkage: be honest.

Tags: retail, shopping