An e-acquaintance alerted me today to a Wall Street Journal article discussing the reasons why government estimates of inflation are to be taken with a truckload of salt.
I’ve read about these factors before, as I’m sure many of you have. But it’s always good to be reminded of them. The WSJ piece gives this memorable example:
Under the official calculations, if steak prices boom, the government just assumes you buy cheaper hamburger instead. Presto—no inflation!
In other words: if you can still afford one type of meat, the “price of meat” is not an inflation factor. The obvious pop-culture allusion is to the Ally Bank commercials in which “even kids know” they’re being given the run-around.
But what’s odd to me is what seems like the collusion of the manufacturing and retail industries in maintaining the fiction of low inflation. I’d love to hear from someone in industry on this topic. What is behind the strategy of repackaging smaller amounts of the product in order to sell them at or near the old price?
I can make educated guesses, of course, but I’d still like to hear from people in the business. The phenomenon is observable in almost every packaged item I buy now at the grocery or discount store. I think it was sometime last year that Northern toilet paper was narrowed, by about an inch across. The rolls have the same number of sheets, but the sheets are narrower. I buy toilet paper in bulk at Wal-Mart, and when the Great Narrowing first occurred, the price of a pack of 24 double rolls was dropped from $13-something to $12.00. Now it’s back up to $13.42.
Stay with me here, if you would. Quite obviously, the ultimate point of this exercise was to change the consumer’s expectation about the size of a sheet of toilet paper. Northern and Wal-Mart could simply have raised the price on the old product, but they didn’t. The product is different now. What drove this? Why is this the choice that was made?
Likewise with a box of stove-top macaroni and cheese. I was startled, a few weeks ago, to open a standard-size box and see how little macaroni there was in it. It was so surprising that I went to the trouble to inspect the box for clues. The box is exactly the same size it has always been, with the same logo and other information, but instead of containing “8 ounces” of macaroni it now proclaims that it contains “7.25 ounces.” (I’m reasonably sure it contained even less.) The box, a store-brand generic, was sold for the same price it’s been for as long as I have been buying the product at this store.
I don’t buy soda very often, so when I picked up a 16-ounce bottle at a convenience store a couple of weeks ago, I was again surprised to see that it was noticeably less full than such bottles have previously been. I don’t keep track of the price of this kind of item, so I can’t comment on that aspect of the transaction. But there was unquestionably less Coca-Cola in a 16-ounce bottle than there used to be.
The list goes on and on; these are just samples. I wonder if other consumers are as curious as I am about whether laundry detergent has really become so magically effective that one can truly do twice as many loads with a smaller jug for which the retailer charges more. When I was younger, manufacturers used to run intensive ad campaigns whenever they were marketing a product as more effective than before. I haven’t seen any campaigns that would relate to the claim in question; I’ve only seen the promise of “2X as many loads!” start showing up, in colorful letters, on the product packaging.
We can all tell when we’re being charged more for less. My water bill keeps going up in spite of the fact that I use less water every year as my landscaping matures – because the rates have gone up. We can tell when we’re being charged more for the same thing, which is what we call inflation. But what’s the driving force behind taking so many extra measures in order to charge us the same for less? Why are businesses handling cost creep that way? What agenda of business benefits from accustoming us to smaller amounts of packaged items? I would definitely like to hear from someone who knows the industry on this. I’m also interested in the theories of readers.