Food producers and importers have diminished the size of their packages in order to conceal price hikes and give consumers the misleading impression that prices have fallen, a "Globes" survey has revealed. In some cases, the smaller packages have raised the price to the consumer by double-digit percentages. In other cases, retailers say that consumers bought the product because they did not notice the change in quantity, and believed that the price had fallen.
The Neto ME Holdings Ltd. (TASE;NTO) group, which owns the Williger brand, cut the amount of tuna in a four-pack from 160 grams to 140 grams in each can - a 12.5% reduction. The company took advantage of the reduction in the amount of tuna to conceal a 7% price hike. The previous retail price was NIS 15.40 before VAT for 640 grams (4 times 160 grams), while the new retail price is NIS 14.40 before VAT for 560 grams (4 times 140 grams). The price for the retailers therefore jumped 6.9%. The Williger packaging displays the words "lower weight package" in small letters, but the fact that the price rose together with the reduced weight did not appear.
Procter and Gamble (P&G) reduced the contents of a bottle of Head and Shoulders shampoo by 20-33%. The company, which used to marketing the brand in a 750 ml bottle, halted its marketing of this bottle, and began marketing two different bottles: 500 ml and 600 ml. The new bottles are very similar to the old ones, giving the misleading impression that the price was reduced. In addition, while the quantity in the bottle is 33.3% less, the retail price has dropped by only 31.2%, constituting a concealed 2.1% price hike for the retailer, rolled over on to the consumer. A retailer said, "The company retained the same container shape. I estimate that only 5-10% of the consumers noticed that the amount in the container was smaller."
Procter and Gamble used the same trick in other brands: Pantene and Fairy. The amount of shampoo and softener in a Pantene bottle dropped 20%: from 750 ml to 600 ml. The price to the retailer was cut by the same proportion. A retailer said, "They changed the Pantene bottle, giving the consumer the impression that it was a new container. The consumer didn't know that they reduced the amount." The amount of Fairy dish detergent was reduced from 750 ml to 650 ml, a 13.5% reduction, while the price to the retailer was cut in the same proportion. Someone buying the Fairy brand in a smaller container now, however, may not notice that the quantity has been reduced.
Behind the reduction in container sizes lies the companies' wish to overcome the price barrier, given the drop in consumption. The same retailer told "Globes," "The price is important in sales. The companies realized that the consumer has barriers: a NIS 10 barrier, a NIS 20 barrier. In order to adapt themselves to the demand and the consumer's ability to pay, they adapted the container. Making the product smaller is not unfair, as long as the price is cut by the same proportion. The problem here is that no one tells the consumer, and consumers don't notice it. They think they're buying at a cheaper price."
Misleading packaging
The method of raising prices by reducing the container size, or misleading the consumer the same way, is unfortunately not new. As recently revealed in "Globes," Unilever also reduced the amount of Krembo in a package of Krembo Strauss by 20%, thereby raising the consumer price by 27-30%. Krembo Strauss is the leading brand in the category, and is responsible for almost all its sales. Despite its name, the brand is now fully owned by Unilever, which acquired ownership of the Strauss ice cream company that also owns the Krembo brand.
It appears that this is not a new method for Unilever. Just before the cottage cheese boycott, the company reduced the amount of Deli Pecan breakfast cereal in a package from 450 grams to 400 grams, an 11% reduction. The price to the retailer was cut by only 5%, meaning that the price to the retailers by weight to the retailer was 10% higher.
Furthermore, in December 2012, Unilever raised its price to the retailer back up to NIS 19.80, completing a 12.5% price hike. No less grave is the fact that Unilever did not reduce the package size at all, and 400 grams of Deli Pecan breakfast cereal are still being sold in exactly the same package in which the 500 grams of Branflakes are sold - a misleading package likely to make the consumer think that exactly the same amount is being sold.
Responses
The Neto Group said in response, "Williger is indeed offering a new and cheaper product in a smaller container in response to the global trend and consumer preferences. The drop in the price to the retailer reflects the relative proportion of tuna as a raw material, including elements in making the final product, such as manufacturing, packaging, employee wages, transportation, etc."
Procter and Gamble said in response, "Over the past year, some of the containers of these products were changed. As required by law, the change in the package size was clearly marked on the container for several months."
Unilever said in response, "The largest Krembo package with 40 units was replaced by two new packages with 20 units and 32 units in order to expand the variety of the family-sized packages for consumer convenience. The change in the number of units is clearly marked on the packages. In any case, the final consumer price is determined by the retailers."
Published by Globes [online], Israel business news - www.globes-online.com - on October 19, 2014
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