Food manufacturers take measures in response to rising costs

05.10.2008 11:02 Shopping - Source: toledoblade.com

Cereal boxes are thinner, a jar of peanut butter feels a tad lighter, that ice cream container has a more tapered look.

As the costs of food ingredients and nonedible materials have risen, grocery manufacturers have adjusted by changing packaging rather than increasing prices.

In most cases, manufacturers are shrinking the package - for example, a jar of Skippy peanut butter is 16.3 ounces rather than 18; Hellmann's mayonnaise is in a 30-ounce, rather than a 32-ounce, container.

But some makers are finding other ways to deal with rising costs, including changing packaging to reduce plastic and transportation costs, offering more package-size options, or charging retailers a separate fuel fee for transportation.

"There's definitely been a lot more of this in the last 12 months," said Carol Sherry, curator of a 100,000-item collection of consumer product packaging at NewProductWorks in Ann Arbor.

"Some of it is definitely the response to the higher cost of the ingredients, and some of it is being done to keep a price point in line for the consumers," she said.

For example, Kashi Co., a maker of health-oriented foods, recently made a subtle change in its frozen-dinner packaging. "It uses 13 percent less cardboard, which ends up being a real savings for the company," Ms. Sherry said.

Customer Shirin Fatemi, of Toledo, said she's noticed the changes in her shopping at Sam's Club: "They kept the price the same, but the amount they give you is less."

She said she recognizes that costs are rising for manufacturers, and overall, she would rather get less than pay more.

"I can't say I don't care about the price," she said. "But the quality is what's important to me. I'd rather have less and think I'm doing the right thing by buying quality ingredients."

Kathy Shearman, of Perrysburg, said, "I noticed it at first especially with toilet tissue. The 'super size' was not really a super size at all. It was a bigger roll, but the tissue wasn't as thick so you used it quicker."

Then, she said, some items that formerly lasted two weeks would be gone in 10 days. It was apparent, she added, that some packages contained less.

"Unless you really pay attention, you may not notice, but the manufacturers are right," she explained. "Most people really are thinking only of the cost. You don't often see that you're getting less."

And for people on fixed incomes, cost is a big deal, Ms. Shearman added.

Commodity prices nationally have skyrocketed, with corn hitting $8 a bushel this summer, compared with $2 in 2006. Rising oil prices have sent the production cost of plastic bottles to an average of 8 cents each from 6.5 cents.

To cope with these added expenses, many manufacturers have created packaging that looks the same as they had been using, but holds less.

For example, Skippy, made by Unilever, has enlarged the dent in the bottom of the jar to reduce the content by 1.7 ounces. The company increased the tapering on its Breyers Ice Cream packages, cutting the container capacity to 1.5 quarts from 1.75.

Dean Mastrojohn, a Unilever spokesman, said, "We have chosen to reduce package sizes as one of our responses to … dramatic input-cost increases."

Dial soap, made by Henkel of America, slimmed its soap bars from 4.5 ounces to 4 ounces this year in response to rising costs of tallow, a key ingredient.

In June, Kellogg Co. slimmed down several boxes of its more popular cereals that use field corn, the main source of ethanol in the United States. For Mini-Wheats, Frosted Flakes, Rice Krispies, Froot Loops, Corn Pops, and Cocoa Krispies, the company shrank 24.3-ounce boxes to 24 ounces and 19-ounce boxes to 18.

"The costs for commodities - including grains and energy - used to manufacture and distribute our products continue to increase dramatically," Kellogg spokesman Susanne Norwitz said.

But recent increases in commodity and ingredient prices are not the sole reasons for changing packaging.

Lynn Dornblaser, a new-products expert at market trends tracking firm Mintel Inc., of Chicago, said that during a trip this summer to a local grocery store, she found that about 10 percent of 100 products she examined had gone through packaging changes.

She said it is important to note that most of the changes were planned 18 to 24 months earlier. Although higher ingredient costs are a factor, so is competition in the grocery industry, she added.

"Breakfast cereals, for instance, are now sold in supermarkets, dollar stores, club stores, convenience stores, and places like Target," she said. "In most of those places, you'll find the sizes are different, and that's a response to the different outlets selling cereals."

Tropicana Products Inc. recently changed its 96-ounce plastic orange juice jug to an easier-pouring design with a snap-tight spout instead of a screw-on cap. In the process, the container capacity was reduced to 89 ounces.

Karen May, a company spokesman, said the bottle was changed to accommodate the new cap and improvements for ease of pouring.

Manufacturers could save themselves time and money on developing packaging by simply raising prices. But Mark Katafiasz, manager of the Food Town supermarket in Lambertville, said manufacturers and retailers know that raising prices on grocery items is about as welcome as the plague.

"It's a psychological thing," he said. "It's far easier for them to downsize their packaging, making something a quarter-inch shorter, than raise prices."

He added: "If the consumer comes in and the price didn't change, they don't seem to notice that they're getting less."

A representative of an ice cream manufacturer recently came to his store to sell him a new brand, and, Mr. Katafiasz said, "he said, 'Our current packaging is this, but we're going to change that soon.' He told me that to stay competitive, they had to downsize their packaging."

Mike Bassett, of Bassett's Market, said customers have lodged few complaints about shrinking grocery packages.

He said customers probably don't see the changes as price increases. But, he said, "if you think of something going from 8 ounces to 6 ounces and they keep the price the same, that's quite an increase in price you're getting."

Not all packaging changes have been strictly to contain costs.

Michael Richmond, of Packaging and Technology Integrated Solutions, of Kalamazoo, Mich., said some changes have been about becoming more eco-friendly while saving money.

For example, Kraft Foods Inc., recently redesigned its salad-dressing bottles, making them slightly taller and slimmer. The bottles still hold 16 ounces - a fact that Kraft put on the label - but the change is saving plastic and translates to more bottles per case, producing huge savings on both fuel and packaging.

Kraft spokesman Richard Buino said the redesigned bottle was part of a new emphasis on "sustainability" - decreased use of a key bottle-making chemical and increased shipping efficiency.

A recent bottle redesign for Kraft's Miracle Whip spread gave it a wider mouth but also allowed the company to put six more pallets of the product on each truckload. "We have calculated that will decrease our fuel consumption by 87,000 gallons," Mr. Buino said.

Contact Jon Chavez at:
jchavez@theblade.com
or 419-724-6128.

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