Wednesday, March 30, 2011

Corporate America fighting obesity by shrinking serving sizes

Well not exactly.  Today's NYT (now a paysite, so there will be fewer links) discusses how food portions in the grocery school are shrinking.  The motivation is not the obesity epidemic; instead it is the rising cost of many raw materials.  Fearful of raising prices and losing market share, companies are reducing the number of saltines in a box, the number of ounces in an orange juice container, and the size of the can for fruits and vegetables. 

But wait, there's more good news -- the smaller packages use less material and thus have a smaller carbon footprint. 

Why is this happening -- I say it is a combination of economics and psychology.  Business school professors weigh in:
“Consumers are generally more sensitive to changes in prices than to changes in quantity,” John T. Gourville, a marketing professor at Harvard Business School, said. “And companies try to do it in such a way that you don’t notice, maybe keeping the height and width the same, but changing the depth so the silhouette of the package on the shelf looks the same. Or sometimes they add more air to the chips bag or a scoop in the bottom of the peanut butter jar so it looks the same size.”

Thomas J. Alexander, a finance professor at Northwood University, said that businesses had little choice these days when faced with increases in the costs of their raw goods. “Companies only have pricing power when wages are also increasing, and we’re not seeing that right now because of the high unemployment,” he said.
 Any link to quantitative easing by the Fed is purely coincidental.   Or is it?

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