The Last Word

April 18, 2013 4:16 pm

Growth of the shrinking consumer products

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Storekeeper Hakim Ali reaches for a sachet of Fair & Lovely face cream, produced by Unilever Pakistan Ltd. as its hangs on display in his store in Jiandal Kot village in Matiari, Pakistan, on Wednesday, Sept. 7, 2011. Unilever and Nestle SA are defying turmoil in Pakistan, where terror attacks have killed at least 35,000 people since 2006, to sell more soap, beauty products and milk to farmers enriched by higher cotton and wheat prices.©Bloomberg

Mini-me: sachets are popular in emerging markets

Forget supersize me. The new zeitgeist is to mini-size. Shrinking chocolate bars, fizzy drinks and ready meals might please New York mayor Michael Bloomberg, who sought, abortively, to ban restaurants and cinemas from selling sugary drinks in portions bigger than 16 oz.

But not everyone is happy. Just 3 per cent of Britons reckon it is fine for companies to quietly shrink pack sizes without commensurate price cuts, according to Which?, the consumer watchdog.

“Big name brands are shrinking products by up to a quarter, but the prices aren’t dropping,” Which? says in this month’s issue of its magazine. “We asked the makers of these products why they had shrunk them, and were generally told that in the face of rising costs they chose to shrink products rather than increase prices.”

Some manufacturers have long used smaller sizes to make products more affordable in countries with lower incomes. Nestlé, the world’s biggest food manufacturer, sells 1 rupee eclairs in India so that low-income parents can treat children (or even themselves).

The Swiss food manufacturer’s small packets proved so popular in emerging markets – where shampoo is sold in single-serve sachets and gum and cigarettes by the stick – that it migrated them to the shores of cash-strapped southern Europe.

In such regions, the group sells many of its best-known products, such as Nescafé coffee, in smaller packs or in more budget-conscious “refill” containers.

Other factors driving the trend are health concerns and the cult of the cute. From cup-sized Sapporo beers to dinky bottles of Coca-Cola, miniaturised products make easy gifts or deliver a smaller jolt of sugar and calories.

Nonetheless, the bulk of the downsizing is all about protecting margins. The survey by Which? discovered packs of Birds Eye beef burgers that have shrunk from 16 to 12 patties; Pledge Clean & Dust furniture polish cans with 50ml, or 17 per cent, less; and a 10 per cent reduction in the number of Superfruity Blue & Black Nestlé Shredded Wheat in a 525g package.

Various brands of crisps, pasta sauces and chocolates were similarly evaporating product while, in most cases, keeping prices stable.

Some manufacturers are cutting costs by concentrating on the containers. Enter the small stuff that contains the same as before but with less packaging. Unilever has shrunk down its deodorant aerosols but kept the amount of deodorant – and £2 retail price – the same.

For an upfront technology and advertising investment that allowed it to compress more into less space, the Anglo-Dutch conglomerate has made savings on costs for transport (more aerosols in a pallet), aluminium and energy (cans do not need to be stretched so much).

Detergents are also getting less water and more power. “Most companies see these operations of business not just as a source of cost advantage, but also sustainable growth,” says Pier Luigi Sigismondi, Unilever’s chief supply chain officer.

For some companies, small has always been beautiful, or at least an important part of their portfolio line-up. The 250ml version of drinks in AG Barr’s cupboard include Rubicon juices and Irn-Bru, the orange fizzy beverage labelled “Scotland’s other national drink”.

Chief executive Roger White says consumers like these for portion control and, in the case of juices, for smaller packs of juices, using to use in lunch boxes.

It is perhaps fitting that as globalisation makes the world seem smaller, so too do the things we use in daily life. The real victory, however, would be if smaller snacks fed through to smaller waists and hence smaller health bills. That bit of the equation, alas, is more elusive.

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