Reduction: what happens when edibles cost less and it’s the same

Edible sellers notice something rare. Bolsas de papas fritas llenas de aire. Latas de sopa que se han encogido. Detergent packets for the little ones.

Companies are downsizing their products without reducing prices and consumer reviews, from Reddit A TikTok, pasando por la comments section of the New York Times, was outraged by this trend, known as discounting (contraction-flation in French).

The practice is not new. Sellers llevan siglos discreetly reduces products to avoid being priced out, and experts feel they have a no-brainer corporate strategy In 1988, when the Chock Full o’Nuts brand reduced its coffee bottle from 455 grams to 368 grams and its competitors followed suit.

But the indignation is most pronounced today. President Joe Biden is an environmentalist in one recent video. (“Lo que más rabia me da es que los envases de helado han disminuido de tamaño, pero no de precio”, deplores). Companies exploit this practice with advertising gimmicks. A Canadian chain presents a pizza growth . (“In terms of pizza”, bromeaba el comunicado de prensa de la empresa, “una tajada más grande”).

But how does the reduction work from an economic point of view? How does this happen with more frequency in the United States and, if so, does it mean that official data does not reflect the true level of inflation? We then explain the trend and what it means for your bag.

It can be difficult to create, but reduction seems to be happening with less frequency today than a year ago.

The Government of EE. UU. Adjust official inflation data to account for product size reduction, and data compilers that monitor size adjustments detect fewer cases of household and food item reduction in 2023 than a year before .

The reduction frequent period in 2016, when general inflation was low. It has become rarer since the pandemic began in 2020, and more recently has struggled to return to earlier pandemic levels, according to analysts at the Office of Labor Statistics. (Economists point out that the set of products evolves in the middle years, making comparisons over time seem closer to an exact science).

Even though size reductions are not produced with such frequency, reduction has a big impact on some key categories, such as golosins, detergent and toilet paper.

From 2019 to 2023, the reduction increased by 3.6 percentage points to inflation for products like paper towels and toilet paper, ahead of the 1.2 percentage points from 2015 to 2019. In recent years, the contraction also It has contributed largely to the increase in prices of golosinas and cleaning products.

In the case of bocadilles, the size reductions amount to a significant 2.6 points of inflation, approximately in line with those contributed from 2015 to 2019. The government has not yet published an analysis of the contribution to the reduction of inflation. general from 2019 to 2023.

The contraction itself is reflected in official inflation data, but it has another hidden force that represents a cost for consumers and does not appear in the statistics. Sometimes companies use stricter materials to reduce costs, a practice some call lesinflation. For the government, it is much more difficult to manage.

If the paper towel roll says so, but the number of days is minor (reduction), the increase in unit price is added to the official inflation. If the paper towels are the same, but they are made of poor materials (lesinflation), the government does not register as inflation.

Indeed, according to government authorities, food and household products do not directly adjust to quality changes distinct from size and weight. This way, if the brand of microwave food that is purchased to use vegetable oil instead of olive oil, or if the resalable packaging comes without your steel, is not note.

Companies choose to code their products instead of priced more for one reason: consumers should stick more to price than size.

When it comes to a song, “people can have data, but the menu doesn’t,” says John Gourville, a professor at Harvard Business School. “There is no impact of the publication on the label.”

A famous example is that of Dannon, which only sold yogurts in vases larger than those of its competitor Yoplait: 226 grams before to 170 grams (ocho onzas contra seis). Consumers are convinced that Dannon yogurt is the tastiest and it is not certain that it is simply the largest. Ultimately, the company gave in and reduced the size of its vases.

“Dannon’s yogurt sales, which declined immediately after the downsizing, have recovered since then,” the Times said in 2003. “And Dannon now has a great deal for every yogurt container it sells. sells.”

Not all tamaño changes are iguales. Some can be surreptitious, like increasing the size of a hand in the base of a cake or recorting the edges of a jabón pastilla. According to Nailya Ordabayeva, an associate professor at Dartmouth’s Tuck School of Business who has studied consumer responses, it is especially difficult for consumers to recognize size changes when they occur in three dimensions.

“The brain is programmed to perform more complex heuristics,” he explains.

Additionally, you will notice that consumers may have disputes by accepting minor quantities or even preferring certain cases. For example, chatarra kitchen products are repeatedly encoded to reduce the number of calories.

When companies only disclose their revenues — and not their consumers — there is tension among pricing experts that leads to persistent reductions in purchases.

When material costs are initially substantial and inflation is reported, consumers are more likely to understand that businesses must bear some of these increases. It’s also possible that smaller products are preferred at higher prices, according to several experts.

But today general inflation has calmed down: it reached a maximum of 9.1 per century in July 2022, in January it was reduced to 3.1 per century. And consumers might have less difficulty accepting the discount now that companies would face less severe cost pressures, particularly because funding for food companies has been high — and in many cases still is.

I can simply be his estafados.

“I think consumers are all more aware of discounting,” said Jun Yao, a business professor at Australia’s Macquarie University who has studied the trend.

And like most chains and online miners’ unit costs, traders may be more attentive to size changes, Yao says, something that could upset hog sales in the future.

This practice, he says, “can be counterproductive and harm the brand’s image.”

Jeanna Smialek writes about the Federal Reserve and the economy for The Times of Washington. More from Jeanna Smialek