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Downsizing Products=Price Increase

If you have noticed that a product that you purchase regularly has a new package, be wary. It could mean that the price has increased and you didn't even notice. That's because of product downsizing.

Product downsizing means just that. Downsizing the amount of product while still charging the same price. For many products, it's better to reduce quantity than raise prices, conclude Harvard Business School marketing professor John Gourville and University of Texas professor Jonathan Koehler.

Have you noticed?
Dairy products went up in price a couple of years ago for various reasons. So products got downsized. Ice cream has shrunk their standard containers to 1.5 quarts from 1.75 quarts, about 1 cup less. The industry downsized from the traditional half-gallon (2 quarts) five years ago. In both cases, only the package shrank, not the price.

"Downsizing is nothing but a sneaky price increase," says Edgar Dworsky, former Massachusetts assistant attorney general in the Consumer Protection Division, now editor of, a consumer website. "I'm waiting to open a carton of eggs and see only 11."

Why the downsizing?
Yes, to make it less obvious to you, the consumer, that prices have risen. The cost for food production has gone up as well. Egg prices rose 44.9% from April 2007 through April 2008, reports the Bureau of Labor Statistics. Corn costs rose 69.5%. And wheat rose 96.9%. Energy prices also are up. So are packaging costs.

According to,

•Less crunch. Since January, Frito-Lay has cut the number of chips in bags across all brands from Lay's to Doritos, though not all product sizes, spokeswoman Aurora Gonzalez says. The biggest cut was to some 12-ounce bags of chips, which are now 10. Some Frito-Lay offerings got higher prices.

"These are common practices," says Gonzalez, who faulted rising costs of commodities, energy, production and distribution. "We determined the best actions based on the products."

•Hold the mayo. A jar of Hellmann's mayonnaise that was 32 ounces is now 30. "The price of our ingredients has gone up dramatically," says Dean Mastrojohn, a Unilever spokesman. "Manufacturing and transportation costs also have increased significantly."

•Spread thinner. Shedd's Spread Country Crock was shrunk from 48 ounces to 45, due to higher commodity and energy costs, Unilever's Mastrojohn says.

•Grain shortage. The price of grains has been rising for a while, in part due to increased demand for corn to produce ethanol. Kellogg downsized Frosted Flakes, Rice Krispies and Mini-Wheats in 2006. Boxes shrank from 24.3 ounces to 24 and from 19 ounces to 18. "I am not aware of consumer issues surrounding this downsizing," spokeswoman Susanne Norwitz says.

General Mills began downsizing cereals last June. Some boxes of Cheerios and Wheaties shrank as much as 1.5 ounces. "Prior to the change, our package sizes were larger, in many cases, than competitors'," spokeswoman Heidi Geller says.

•Slippery soap. Early this year, Henkel of America downsized its Dial soap bath bar from 4.5 ounces to 4, says Scott Moffitt, Dial's Personal Care senior vice president.

The decision was primarily due to the skyrocketing cost of tallow, the natural fat from cattle that's a key ingredient in the soap.

•Less bountiful. This spring, Bounty cut the number of towels on a roll from 60 to 52. Procter & Gamble spokeswoman Celeste Kuta says the reduction was because the sheets are now "improved" and thicker.

What can you do?
Bring your calculator with you when you shop.
Calculate price per unit/use/serving and then compare that to the other products. You may have to convert units of measure (yet, another tactic to stupid us up).

Companies are banking on consumers to not notice or to be too busy with other things to speak up. Complaining to the company may do you some good if there are other irate consumers doing the same.

As the cost of goods increase, manufacturers routinely pass these costs on to consumers through higher prices. A less obvious strategy is to maintain price, but to reduce the size of the product. In many ways, this downsizing should mirror a straight price increase when it comes to consumer behavior. Marketplace and experimental data show this is not the case and that consumers are more sensitive to changes in price than to changes in quantity.There's a science to downsizing products, and few have studied it as closely as John Gourville, a marketing professor at Harvard Business School. He studied purchasing patterns for 157 ready-to-eat cereals in 2004 and concluded that consumers are far more sensitive to higher prices than to less product. "People are generally unaware they're getting less," he says. Most of those who are aware say they'd rather get less than pay more.

Several well-known products have gotten smaller recently
Then Now
Hellmann's mayonnaise 32 oz. 30 oz.
Some Frito-Lay chips 12 oz. 10 oz.
Shedd's Spread Country Crock 48 oz. 45 oz.
Dial soap bath bar 4.5 oz. 4 oz.
Bounty towel roll 60 towels 52 towels
HBS Home

no one deals like we do!


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