Companies raise consumer prices but only executives can spot it
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Americans are pay more for a wide range of household items today. Even items that don’t have a higher sticker price can still be more expensive – barely noticeable at first glance.
That’s because some companies have reduced the content of their packaging. A box that once held 16 ounces of coffee may now have only 14 ounces left; 300 sheets of toilet paper could have been reduced to 275 sheets.
In the end, consumers pay more for this “miniature inflation”, since they pay the same price for a lower amount. But they may not notice without reading the fine print on the packaging.
“It’s a sneaky way to raise prices for shoppers,” said Edgar Dworsky, founder of the Consumer World website and a former assistant attorney general in Massachusetts who focuses on consumer protection.
“Manufacturers know consumers care about price,” he added. “If they raise [sticker] price, they know shoppers will notice. “
‘Double whammy’
Miniaturizing products isn’t new, says Dworsky – American companies have been using this tactic for decades. The larger size does not necessarily disappear forever; Companies sometimes reintroduce them later but at a higher price, as with boxes of “family size” cereal or bags of “party size” chips.
However, deflation tends to be cyclical and it has cropped up more often in the past few months.
Recently, Dworsky found that One brand’s raisins packs dropped about 2.5 ounces in weight, while another company downsized its toilet rolls. Several brands of yogurt, body wash, soap, and biscuits were also produced.
This is happening as consumer prices increase at the fastest rate in 12 months in about 40 years.
“It’s a double award,” said Jack Gillis, executive director of the Federation of American Consumers, an advocacy group. “Consumers are facing two things at once: severe inflation and the decision by many companies to downsize the products of the things we buy every day.”
Federal Reserve raised its benchmark interest rate to 0.25% from near zero on Wednesday to curb inflation. This is the first time the central bank has raised interest rates since 2018.
Increasing prices and decreasing volume helps companies to gain profits. Their costs are also increasing. The outbreak of Covid-19 and the war in Ukraine are clogging supply lines, rising raw material prices and higher gas and fuel prices could drive up transportation costs to deliver goods.
However, consumer advocates suspect that some companies may artificially raise prices so that consumers take advantage of the inflationary environment and increase profits.
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Consumers can combat miniaturization by looking at the “unit price” of a product in a store. This shows the cost per ounce or other unit of measure, allowing buyers to easily gauge which brand offers the best relative value.
“Price per unit is your best weapon against microinflation,” says Gillis.
Consumers should also become more accustomed to checking packaging for net weight, Dworsky said, looking no further than a brand’s marketing.
Substituting store brands for higher priced branded items is also a good way to save Gillis added.