Beware of bargain prices wrapped in smaller packages

The NY Times printed a mostly anecdotal article about companies hiding price increases in smaller packages in “Food Inflation Kept Hidden in Smaller Bags” (reprinted by CNBC). The article chronicles one shopper’s slow awakening to the shrinking packages all around her as she tries to stretch the family budget to keep the same food on the table. Examples of shrinking products include a can of Chicken of the Sea albacore tuna, Doritos, Tostitos, Fritos, “fresh stack” packages of Nabisco Premium saltines and Honey Maid graham crackers, Procter & Gamble “Future Friendly” products, and the unwrapped Reese’s Minis.

We have printed similar stories of companies using shrunken packages as a method for passing on stealth price increases (see category “Disguised Inflation“):

  1. November 28, 2009: “Food packages are shrinking, but prices remain the same
  2. January 25, 2010: “Stealth inflation
  3. November 11, 2010: “Inflation hidden in higher unit costs

Inflation hidden in higher unit costs

Thanks to Tim Ianoco for posting a link to this article from Fortune: “Why your toilet paper is shrinking“.

In this short post, Fortune provides a detailed diagram showing how companies have held product prices steady but have shrunk toilet paper rolls to cover the higher costs of pulp and shipping. In other words, the per unit cost (square inch of toilet paper) has increased, but this increase is not reflected in the final price, but in the lower amount of product provided at that price. This is a common tactic to disguise the inflated price of a good to maintain the appearance of price competitiveness. Just one more way in which an apparently benign pricing environment is actually sitting on top of roiling pricing pressures.