But not all are quick to follow that trend, which could raise inflation throughout the U.S. Some major manufacturers are downsizing products in lieu of increasing prices — a method many companies have found to be less troubling to consumers, mostly because they don’t notice it right away.
Stealthily easing in a downsizing is less likely to be noticed than a 3 percent spike in food prices, which is was is expected in 2011 as a result of higher commodity and fuel costs.
Instead of bringing out the price gun, some manufacturers deepen the indents on the bottom of containers; others reduce the thickness of plastic wrap; and still others cut down on portion sizes. Kraft Foods, for example, cut two slices out of its reduced fat and fat-free cheese singles packets in 2009, while Angel Soft toilet tissue replaced its 352-sheet rolls with 300-sheet rolls and Kimberly-Clark Corp reduced the size of its Scott toilet paper squares.
In its Feb. 2011 issue, Consumer Reports magazine reported on the product downsizing trend, claiming, “No one likes a price hike, but what riles readers are the ways manufacturers hide their handiwork.”
An article in the Vancouver Sun reported that linger low levels of consumer confidence makes it increasingly more difficult for companies to pass on higher prices. Most companies, the article suggested, will choose to protect market share than try to boost margins.
The Associated Press suggested in a Jan. 13 article that competitive pressures are what prevents companies from passing increased costs onto customers in the form of higher prices. In a separate article, published on Jan. 14, the AP reported that U.S. grocers resisted passing along higher prices for meat, bread and other goods last year, with a weak economy and unemployment near 10 percent. But that hesitation will likely change as food producers raise their prices and stores slow their discounting, the article noted.
Supermarket chain Kroger Co. is passing on some price hikes from national brand suppliers, but is selectively raising other prices, the AP reported. ConAgra Foods Inc. and General Mills Inc. are both raising prices to cope with higher ingredients costs.
If some companies do not pass along the higher costs, they will have to resort to methods other than product downsizing to save money. Among those methods — delaying hiring or putting off pay raises, according to the AP.
Whether raw material prices have hurt bottom lines remains to be seen, but first-quarter earnings could shed light on companies’ methods of coping with pressure and managing costs.