Companies Manage Rising Costs with Smaller Offerings
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Companies in the food industry are managing raising food costs by cutting the volume offered while maintaining the original price.
This method is very common for companies to use during an economic downturn over the past few decades.
The New York Times mentions that companies will use a coy campaign so the consumer doesn't focus directly on the volume cut. Some of the campaigns include things likes "going green," "more portable," and "healthier."
The article states that bags of Doritos, Tostitos, and Fritos now hold 20 percent fewer chips than in 2009.
In markets in which companies are unable to reduce its amounts, like clothing or appliances, warning to its consumers that prices are going to rise as the costs of cotton, energy, grain and other raw materials are rising have already been released.
"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.
Kraft (NYSE: KFT) is also doing its part by introducing its new "Fresh Stacks" packages for its Nabisco Premium saltines and Honey Maid graham crackers. The container holds 15% less crackers than the original one, but the price has not changed. Kraft feels that it's more portable and "the packaging format offers the benefit of added freshness," said Basil T. Maglaris, a Kraft spokesman, in an e-mail.
Procter & Gamble (NYSE: PG) announced that it will be expanding its "Future Friendly" products, which it promotes as using 15% less energy, water, or packaging than the original ones.
"They are more environmentally friendly, that's true - but they're also smaller," said Paula Rosenblum, managing partner for retail systems research at Focus.com, an online specialist network. "They announce it as great new packaging, and in fact what it is is smaller packaging, smaller amounts of the product," she said.
Link to NY Times Article
This method is very common for companies to use during an economic downturn over the past few decades.
The New York Times mentions that companies will use a coy campaign so the consumer doesn't focus directly on the volume cut. Some of the campaigns include things likes "going green," "more portable," and "healthier."
The article states that bags of Doritos, Tostitos, and Fritos now hold 20 percent fewer chips than in 2009.
In markets in which companies are unable to reduce its amounts, like clothing or appliances, warning to its consumers that prices are going to rise as the costs of cotton, energy, grain and other raw materials are rising have already been released.
"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.
Kraft (NYSE: KFT) is also doing its part by introducing its new "Fresh Stacks" packages for its Nabisco Premium saltines and Honey Maid graham crackers. The container holds 15% less crackers than the original one, but the price has not changed. Kraft feels that it's more portable and "the packaging format offers the benefit of added freshness," said Basil T. Maglaris, a Kraft spokesman, in an e-mail.
Procter & Gamble (NYSE: PG) announced that it will be expanding its "Future Friendly" products, which it promotes as using 15% less energy, water, or packaging than the original ones.
"They are more environmentally friendly, that's true - but they're also smaller," said Paula Rosenblum, managing partner for retail systems research at Focus.com, an online specialist network. "They announce it as great new packaging, and in fact what it is is smaller packaging, smaller amounts of the product," she said.
Link to NY Times Article
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