Store Brands Imitate Pack Size Reductions

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February 8, 2011

Instead of increasing prices on same-size products, several retailers are following the lead of consumer packaged goods companies by reducing pack sizes in order to keeping prices flat.

Grocers such as Kroger, Safeway Tom Thumb and Albertsons told the Fort Worth Star-Telegram they are reducing the size of private label packs, following teh actions of national brands.

"They're taking a few ounces out of a product, putting in fewer potato chips and putting more air in cheese and ice cream," said George Haley, marketing professor and director of the Center for International Industry Competitiveness at the University of New Haven's College of Business. "Usually it's done because producers don't want prices hitting the point where they feel consumers would reject the product."

Consumer should expect to see this practice continue as the U.S. Agriculture Department estimates that food prices will increase 2 to 3 percent in 2011 compared with 0.3 percent last year.

Albertson’s told the Star Telegram they are simply following what national brands have been doing for a long time. "If a national brand changes the size of its packaging, then eventually the store brand will follow suit, which is an industry practice that is not unique to Albertsons," spokeswoman Christine Wilcox said. "This offers consumers an 'apples to apples' comparison of our product's value versus the national brand."

While Kroger has changed the sizes of its house products to match the national brands' in some cases, Kroger spokesman Gary Huddleston said in some cases Kroger has reduced pack sizes and in others it has increase pack sizes. For example, the grocer’s private label Home Sense paper towel and toilet paper, has a higher unit count than comparable national brands.

Product downsizing is not new, and "there never has been any real serious consumer backlash because everyone does it at about the same time and consumers really have no alternative," Haley said.

Essentially, food manufacturers are passing cost along to consumers in a different way, said Susan Fisher, associate professor of foods and nutrition at Meredith College in Raleigh, N.C. "The consumer who might have paid $6 a pound for coffee now still pays $6 but for three-quarters of a pound. The per-ounce price has increased, but that escapes the consumer who sees the unit as a bag of coffee rather than the number of servings per bag." Fisher also noted that sugar used to be sold in five-pound bags, which are now sold in four-pound bags. “Cereal [companies] have also done this for years," she said.

The January issue of Consumer Reports magazine identified other blatant product size reductions among national brands:

• Kraft American cheese: 22 slices instead of 24 per packet, down 8.3 percent;
• Tropicana orange juice: now 59 ounces per carton instead of 64, down 7.8 percent;
• Classico pesto sauce: 8.1 ounces per jar instead of 10, down 19 percent;
• Ivory dish detergent: 24 ounces per bottle instead of 30, down 20 percent;
• Hebrew National hot dogs: 11 ounces per pack instead of 12, down 8.3 percent.

SBD Views: The list of bad business practices that have been automatically followed by others could fill a book. While I’ve never accepted “everyone else is doing it” as justification for taking action --  just ask my kids or the hotel clerk that said I had to pay extra to check in before 4 p.m. because other hotels are charging to do it  -- I see how the trend of national brands reducing pack sizes presents a dilemma for retailers. Do you reduce pack size on store brands to maintain comparability or do you maintain your existing pack size to offer more than the comparable national brand? In my view, it would be interesting to see what shoppers think about this practice before making the call.-- John Failla for Store Brands Decisions

Read These Related Articles:

• Research: Household Products Brands Under Attack as Consumers Still Fixate on Price
• Auchan and Metro Form Private Label Alliance
• Nielsen Predicts Continued Store Brands Share Gains
• P&G and Other CPGs Cut Prices to Combat Store Brands
• Food Deflation Could Hurt Store Bands More Than CPGs

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