Food Price Inflation Hidden in Packaging

December 4, 2010, by Ken Jorgustin

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food-inflation-hidden-in-smaller-packaging


Food Price Inflation. How long can food companies continue to hide inflation using their food packaging schemes?

It seems to us, at least where we live, that not only are food prices in general continuing to creep higher, but the packaging is cleverly getting smaller.

The stealthy shrinking packaging has been largely going unnoticed – and is not realized until a threshold is met in your mind when one day you suddenly realize what’s been happening, similar to how the growth of a young child largely goes unnoticed for awhile until one day you realize how ‘junior’ has grown.



The other day while shopping, I noticed a particular brand of peanut butter on the shelf that I had not sampled in years. Since my recollection of the flavor was savory, I decided to splurge and buy it to see if it still held up to my expectation. I remarked to my wife how the price seemed fairly reasonable… until I picked it up and realized that the jar was smaller than it should be. I instantly could ‘feel’ that the diameter of the jar was smaller than before. I just knew it was different.



Foods used to be packaged in sizes that made sense – ‘even’ ounces, or round-number sizes (without decimals) like 16 oz. or 12 oz. etc…

Now, not only are there all sorts of unfamiliar size packaging, but you often see decimals after the whole-number! From a consumer standpoint, what is the sense of a 14.3 ounce package? Most likely, this product was once packaged in a 16 ounce containment. Where did the 1.7 ounces go? Why that package size? The answer is simple. The slight reduction enables the corporate ‘bean counters’ to increase their profit margin, all for a variety of reasons ranging from Wall Street and stock holder demands, to keeping up with their own increased costs of production. Packages are getting smaller and smaller.



Now lets do the math. Lets say that product xyz is priced $3.00, same as it was 4 months ago. However instead of being packaged as a 16 ounce portion, now it is only 14.3 ounces. Some people may not even notice the small change in weight because of the clever way that the container and labels are redesigned to create the appearance that it hasn’t changed. Clever corporate marketing.

Well, that difference in weight (1.7 ounces) equals a 10 percent food price increase! Even with only a barely noticeable 1 ounce reduction from a 16 ounce package equals a 6 percent food price increase! This is a major way in which food companies have been hiding food price inflation.



Nowadays, not only are the packages getting smaller, but they are also raising food prices. A double-whammy. That $3.00 product not only went up 10 percent because of a downsized package, but they also raised the price to $3.29, an 8 percent price increase! Between the packaging change and the price increase, the food price has gone up 18 percent in this example!

Another way of saying this is that the purchasing power of your dollar has decreased by 18 percent, in this example.



When comparing similar food products on grocery store shelves to determine the best price between them, it is sometimes helpful to read the shelf tags to determine the price per unit – which can then used to compare.

The problem is, the methodology is sometimes (often?) different from one product to another. Sometimes it’s price-per-ounce, other times it’s price-per-serving. One thing that I’ve noticed is that in addition to package downsizing, the serving sizes are changing – and often do not match from one product to another. This makes it really difficult to efficiently determine cost comparisons from one product to another.

(insert sarcasm)
Don’t you worry though…soon enough, peanut butter and other goodies will be sold in one-serving squeeze tubes instead of 18 ounce jugs, but will still cost you $3.00. At least it will be easy to figure out price-per-serving!



Now that we see what is happening with food prices, what is the best thing we can do?

Answer: Be aware of what is happening and buy more food now, rather than later,
because this will not stop anytime soon.



The current economic mess, the massive debt of the USA (and many other countries of the world), the policies of the ‘Fed’ and excessive printing of money, are resulting in the devaluation of the currency. Without getting into the details of that, suffice it to say that inflation is here, and is going to get much worse in the future. The Fed is stuck in a corner and has no choice but to continue on its course – the opposite of which would surely crash the already delicate economy.

Stock up on food now. It makes financial sense. It makes preparedness sense.



Corporate scheming, trimming, squeezing, downsizing, profit optimizing, is nothing new – although it definitely seems to be more extreme than it used to be (in my opinion). In a sense, they are doing what they have to do to make a profit. Profit, after all, is the aim of business. The real problem has been runaway government policies which have led to years of easy money and a way of life that demands to ‘buy it now’ and pay for it later.



See who controls the food supply: List of Top 50 Supermarket Grocery Chains



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