Free Markets, Free People


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.

~McQ

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25 Responses to Are food prices higher? The answer is “yes”!

  • Let’s squeeze the Presidency from two terms down to one term

  • Last year, I’d commonly see chicken thighs for .88/#.  Now, I seldom see them for less than a buck.
    LOTS of stuff is appreciably higher now.  Obama’s approval ratings are NOT among them…

  • The economy was really bad then, and we just didn’t think it was the time to ask them to pay more.”

    How is paying the same for less not paying more? Just an observation.

  • Not to overstate the obvious, but, keeping the price the same while reducing the amount you get is a price increase. They are just relying on consumer inattention to mask the increase. As you mentioned, I always base my purchase on the price per quantity rather then per item. Wouldn’t surprise me to see that information start disappearing from price labels.

  • I’m sure the President will put AG Holder to work rooting out those evil “Jiff” speculators. You know, Big Peanut…

  • This didn’t start in 2008.  It happened during Clinton’s whitehouse with hidden inflation.  I used to buy a small microwave pizza that shrank from about 9-10″ round down to 6″ round. 

    Laundry detergent is on its second iteration of going to a 2X concentrate formula with almost twice the cost and then going back to 1X in a similar sized bottle for very little price change. 

    • Yeah, I should have said “this round of smaller portions started with the 2008 recession”.

    • In 2007, when steel prices were soaring, we would reduce the amount of steel in all of our products. Then it went up again and we had nothing left to squeeze. Our customers, rather than raise prices, wanted entire new designs to hit the price points, usually $99.99, above which the consumer won’t buy anything. That worked until steel once again went up lately…now I think the prices will just go up. No more room for games.

  • But the Malfeasant Media tells us not to look at that man behind the curtain…

  • My coffee now comes in 9 once bags. Doesn’t this add to more trash in the waste stream? Where are the environmental nannies now? Oh, that’s right, can’t criticize, it would reflect poorly on the Anointed One.
    Speaking of environmental nannies, did anyone notice your automatic dishwasher stopping cleaning your dishes? The environmental nannies took the phosphate out, and now my dishwasher was all-but-useless. When I found out about the lack of phosphate, I realized phosphate is as close as that box of TSP (trisodium phosphate)I use to wash my walls with before painting. A little dash in each load and voila, clean dishes again (works wonders in the clothes washer too)

  • Maybe MiniTru can run a few stories about the upside of this a la “funemployment”.

    “Thanks to the leadership of Comrade Obama, I’ve lost sixteen pounds in the past three months!  AND I have lots of time to work on my tan!  Plus, since I can’t go to the beach this summer, I get to know my neighbors better while at the community pool!”

    “During the Bush years, my kids just got fatter and fatter from all the cheap junk food that they ate.  Thanks to the wonderful policies of our beloved leader, Barrack Obama, now they are losing weight!  And I have so much more time to spend at home with them!”

    “Since I have started my own vegetable garden, I am becoming more connected with Mother Nature and the good Earth because of Barrack Obama, peace be upon him!  If the plant stays closed, I plan to double its size next spring!”

    “Animal rights activists are overjoyed at the precipitous decline in meat consumption among Americans.  ‘At last, Americans are starting to see animals as equal owners of the earth and not as mere food items,’ said Gary Wolcott of People for the Kind Treatment of Animals.”

    “Citing rapidly declining obesity rates, White House spokesman Jay Carney credited administration policies for healthy changes in American eating habits. ‘Food prices in America used to be much lower than in many other parts of the world,’ Carney said.  ‘Now that they are more equitable, Americans are learning to eat smarter, and the results are showing up in their belt lines.’”

    Come to think of it, I’m sure that MiniTru could get plenty of pat slogans and phrases from North Korea about the virtues – nay, JOYS –  of eating less.

  • Back in 2004, the media was in overdrive trying to sell the Bush=Hoover meme, you know, the first President since to usher in a net job loss.  And that was when unemployment was listed as 6%.  I recall several debates with friends who lamented just how bad the economy was, and complained how the Bush Administration was cooking the books on the jobs numbers.  I bring this up because the media is in hyperdrive now, trying to obscure all the negatives, and conveniently forgetting all those arguments deployed to bash Bush now that their hero, Barack Obama is the culpable one.

    The buffet of hope and change they feed on is quite removed from reality.  And while it may work in the movies – think the dinner scene in Hook, responsible adults know that you can’t feed a family on fairy dust.

    • I knew people who told me it was a “recession” then. I bet they know better now.

      • One particularly poignant moment came after a friend commented how destitute rural New England looked.  I asked how many of those homes had boats on trailers out front hooked up to late model crew cab trucks?

        chirp…

    • I can remember back in 2007 telling people that this is the good time.
      You could never tell that from the media

  • I cannot for the life of me understand why people do not have the courage to say the word, depression.

    Stag-flation, remember that term we had to learn in the 70s?

    The sad truth is both terms are completely applicable to the US.

     

    • Well the problem is that inflation has been under reported for almost 20 years.  Both parties are guilty of hiding it and don’t want to fess up to the fact.

  • Look, ALL prices are higher lately, we are starting to see the inflation that was “just around the corner”. It is driven by a weak dollar, and as long as Turbo Tax Timmy and QE2 Bernanke keep pumping more dollars into the system it will only get worse.

    Hope you all bought some gold.

  • Just wait until they return to cutting the chocolate with parafin again, like Hershey did during the Carter Administration.