7/28/2014 3:45 PM ET|
Sneaky ways food companies make you eat price increases
Are you spending so much at the supermarket that you get indigestion? This may be why.
With food prices rising, food manufacturers are making sure consumers stomach the extra costs.
Almost all perishable foods - dairy, meats, fruits and vegetables - have seen price increases because of the drought out West, continued high oil and gas prices and diseases affecting crops or livestock.
The Bureau of Labor Statistics says the price of a pound of ground beef increased 16.5 percent to $3.85 in May compared with a year earlier. In the same period, a pound of Navel oranges increased 28.1 percent to $1.34, while a pound of American cheese increased 11.1 percent to $4.51.
Food manufacturers rarely want to eat price increases because they don’t want to gamble on whether and when prices will return to normal previous levels. “It might make sense in the short run if one anticipates the cost increase will be temporary, but it’s more difficult to accept in the long run as it will reduce the profits of the company,” said John Gourville, professor of business administration at Harvard Business School.
Instead, food manufacturers have adopted new tactics within the past decade, some more deceptive than others:
Simply raise prices
While it seems the easiest action to take from a company’s standpoint, consumers pay great attention to price increases and may change their purchasing habits as a result. “Shoppers are price conscious and will spot the increase,” noted Edgar Dworsky, founder of ConsumerWorld.org, a consumer resource guide.
Reduce the size of their products
Whether experts call it “downsizing price increase” or “obscured-inflation,” it usually consists of reducing the amount of product in the package. It’s typically done with coffee, ice cream, sodas or cookies.
“The price increases are mostly disguised using smaller portions such as half-liter soda bottles instead of 20 ounces,” said Thomas J. Alexander, associate professor of finance at Norwthood University, which is based in Midland, Mich. “You can’t even find a real half-gallon of ice cream anymore.”
This option works if consumers don’t notice the size change, or notice it but care more about price than sizing. In any case, it’s often the option that gets the most press. “It seems the most deceptive,” said Gourville.
Disguise downsizing or a price increase by releasing a new version of a product
A variant of the above-mentioned option consists of changing the physical makeup of a product or its container while reducing its size and in some cases also increasing its price.
For example, a package of Keebler’s Chips Deluxe cookies recently went from 13.3 ounces to 11.6 ounces, but before Kellogg’s went ahead and reduced the size, it made sure it first changed the look of its packaging so the size decrease wouldn’t be as noticeable.
“Obviously, if you are paying the same price but getting less, that is a backdoor way of raising the price,” said Dworsky. “It is very sneaky.”
He recommends that consumers fight back either by writing to food manufacturers to complain when they spot a product that was downsized, or by looking for competing products that haven’t yet downsized.
“My advice is that we have to become not just price conscious, but also weight conscious,” he said.
More from The Fiscal Times
VIDEO ON MSN MONEY
I suspect they deceive fewer than they realize and mostly generate anger towards their product and their company for engaging in such deceptive practices.
It is their product and they have every right to package it and price it however they want to. Accordingly, I have the right to buy something else, and I exercise that right frequently.
I understand that there are times when costs increase for the company but I would hold a more favorable opinion of them if they would just "man up" and raise the product's price rather than engaging in repackaging and sizing deceptions.
Maybe the Social Security COLA is based upon the price of a package of food, not the weight.
If you look at the price increases on food, cars, fuel, and housing expenses, how can the government
only give seniors a 6.9% increase for 5 years.
(0% in 2009, 0% in 2010, 3.6% in 2011, 1.7% in 2012 and 1.5% in 2013)
The government is saying that a senior with $1,000 in 2009, only needs $1,069 today to buy the same amount of goods and services. By the way the Medicare premium went up 8.8% or $8.50 over that same time period.
There is more than a couple post for $15 hour increase for the unskilled, uneducated workers - more than doubling the current minimum wage. My question for the 'living wage' crowd is - Do you also support doubling the Social Security payments seniors and those on disability receive? Increasing the minimum wage for unskilled workers to $15 would result in a gross yearly wage of $31200, the average yearly social security payment to seniors is $15528.
As for 'sneaky ways food companies make you eat price increases', everything is spelled out on the package about the weight, size or amount of the product and the cost. Another 'evil big business' article which does not mention the constant addition of new, costly rules and regulations by the federal government which increases prices. In 2013, the federal government imposed an additional $112 billion in regulatory costs, from 2009 to 2013, new rules and regulations have added an $494 billion in costs to products and services in the US. This does not include the 20 ObamaCare-related tax increases totaling $800 billion over the next ten years.
The top three reasons food is going up
Copyright © 2014 Microsoft. All rights reserved.
Fundamental company data and historical chart data provided by Morningstar Inc. Real-time index quotes and delayed quotes supplied by Morningstar Inc. Quotes delayed by up to 15 minutes, except where indicated otherwise. Fund summary, fund performance and dividend data provided by Morningstar Inc. Analyst recommendations provided by Zacks Investment Research. StockScouter data provided by Verus Analytics. IPO data provided by Hoover's Inc. Index membership data provided by Morningstar Inc.
RECENT ARTICLES ON PERSONAL FINANCE
Occupy Wall Street bought and forgave the student loan debt of more than 2,700 Everest College students.