Are food prices higher? The answer is “yes”!
Although you have to do a little comparison of portion sizes to understand that. It’s an old marketing trick the food industry has used in the past where prices remain about the same, but portion sizes get smaller and smaller. It started with the recession of 2008. For example:
Unilever U.S. Inc. cut a jar of Skippy peanut butter from 18 ounces to 16.3 ounces in the first quarter of 2008, wrote Dean Mastrojohn, a company spokesman in New Jersey, responding via email to questions. Unilever was facing rising commodity costs – the “same environment as today,” he wrote.
Haagen-Dazs shrank its pint of ice cream from 16 to 14 ounces in early 2009, said Diane McIntyre, a spokeswoman for parent company Dreyer’s Grand Ice Cream Inc. in Oakland, Calif. Its expenses for dairy products, eggs, vanilla, raspberries and other ingredients had risen by an average of 25 percent, she said.
“We just aren’t going to compromise in what we put into the ice cream in terms of quality,” McIntyre said.
The company didn’t want to pass on a higher price to consumers, she added. “The economy was really bad then, and we just didn’t think it was the time to ask them to pay more.”
This month, with many product materials still expensive or rising, Haagen-Dazs did boost prices. The 14-ounce ice cream rose from $4.39 to $4.69, McIntyre said.
It is a pretty common practice, especially in times of rising prices for ingredients:
“You’re seeing it across the board,” said Ann Gurkin, a food, beverage and tobacco analyst for Davenport & Co. in Richmond.
“It’s one way to raise prices” that consumers don’t notice as much, she said. “You’ve seen both package changes and you’ve seen prices going up. I think it’s both.”
Manufacturers do this to combat rising costs, Gurkin said. They’re dealing with higher grain prices because of low harvests last year of corn, flour and soybeans – which go into baking products and snacks. They’re paying more for meat used for soups and frozen meals.
And, like the rest of the nation, they’re battling spikes in oil prices. Petroleum is used in packaging materials, and gasoline and diesel are required to transport goods.
So the reductions continue:
Cans of tuna fell from 6.5 ounces to 5 ounces, according to the commission. Evaporated milk dipped from a 14.5-ounce can to 12 ounces. … A carton of Tropicana orange juice squeezed down from 64 ounces, a full half-gallon, to 59 ounces. … A large box of Kleenex dropped from 280 tissues to 260. A pound of coffee, 16 ounces, dropped 25 percent to 12 ounces, and some brands have started to slim that further, down to 11-ounce bags.
The reasons are obvious:
Smaller packages are more palatable to consumers than price hikes, said Ken Bernhardt, a marketing professor at Georgia State University who specializes in consumer behavior. “It’s a lesser evil than having to pay more.”
The goal is to trim the package “to the point where it’s barely noticeable,” he said.
Indeed. But the message is this – food prices have been and continue to go up. At some point, the food industry isn’t going to be able to hide it in the packaging (check out the price per ounce most grocery stores have on the cost labels. You’ll see what I’m talking about in terms of cost).
If you think gas prices ignite political fire storms, wait until it becomes more obvious that food prices are increasing rapidly (see reference to low harvests and oil prices). At the point that food manufacturers can’t reduce the package size anymore and must increase pricing because of the increased cost of ingredients, transportation and distribution, you’re going to see real fireworks begin.
My guess? About the end of this year or the first part of 2012.