Like all processed food producers, Kellogg Company (NYSE: K) is facing rapidly climbing costs for corn, wheat and sugar, the basic building blocks for many of its products. Rather than passing those costs on to consumers in a straightforward manner by raising prices, Kellogg is taking a sneakier route: making some of its cereal boxes smaller while keeping the price the same.Starting this month, Kellogg will shrink the size of boxes of Apple Jacks, Cocoa Krispies, Corn Pops, Froot Loops and Honey Smacks by an average of 2.4 ounces.
Of course, using this approach is in the end the same as simply raising prices. The key is price per ounce, which goes up whether you reduce quantity or increase price. So although you will pay the same price for a box of these sweet cereals, the per ounce cost of a corn syrup high in the morning will go up.
Even though reducing ounces per box amounts to a price increase, smaller boxes have a different psychological effect than adding a few pennies to the retail price. Food companies use this approach in the hope that most consumers won't notice, and research suggests that this is in fact true.
I suppose this means that most shoppers don't look at the per ounce cost when buying things like cereal. When it comes to inflation, maybe ignorance really is bliss.
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Reader Comments (Page 1 of 1)
6-18-2008 @ 1:46PM
william lindblad said...
Old hat. This practice has been around for years and shoppers do notice. I thihnk we should credit Campbells as the innovator. They started to shrink bean cans years ago and they went from 16 oz to the present 11.
Same can be said for their soups.
6-18-2008 @ 4:03PM
Mike Sanders said...
Why didn't the oil companies think of this? They could have kept the price down, by changing to the metric system, i.e., the "liter." We might be paying something around $1.00 a liter, instead of $4.00 a gallon! :-)
6-19-2008 @ 2:47AM
DOCJAY1111 said...
ICE CREAM ALSO,NO MORE 1/2 GALLON,MOST OF THEM ARE 56 OUNCE
6-19-2008 @ 2:13PM
bahstinmjb said...
Nobody is honest anymore. Politicians LIE, Retailers LIE, CEO's LIE, your kids LIE, .....it goes on and on. What do you expect? Read the labels, do the math, and BUYER BEWARE.