Why Brands Who Reduce Portion Sizes & Not Prices Are Asking For BIG Trouble

In this opinion piece, the creative director of GMG Digital, John Isaac (pictured below), argues FMCGs who sneakily decrease the portion sizes without reducing the price could be in for a nasty backlash from customers…

Why have so many FMCG brands decided to slash portion sizes but not prices? As consumers, don’t we find this to be a major concern? We are expected to pay the same prices, for less product and in some cases, for an inferior tasting product. Shouldn’t such companies look to create new products (or improved versions) to satisfy customers yet still meet their financial demands? Innovation surely is key.

This article came about after witnessing a few media stories recently where customers complained about the portion size of their favourite confectionery being reduced yet the prices had remained the same. (Cue serious looking investigative current affairs reporter looking for answers).

Cadbury, Australia’s biggest chocolate player, blamed increasing ingredient prices and packaging costs. They reduced the sizes of favourites including Freddo Frogs and the Family blocks yet reported a 46% profit increase in 2013 ($127 million). Interestingly, Tony Abbott promised some $16 million in funding to the Tasmanian based Cadbury manufacturing plant in 2013. You would think some of that $127 million profit could be injected into the business if it were suffering. After all, the Tasmanian based factory churns out some 80 million family blocks each year.

It’s interesting that in December 2014, Frito-Lay, maker of Twisties, Burger Rings, Sakata, Nobbys Nuts and Smith’s chips, announced a 47% profit increase (Frito-Lay itself is owned by PepsiCo) yet now, in July 2015, they are announcing a reduction of packet sizes of Smith’s crinkle cut chips and Doritos corn chips by 5g, yet maintaining the same prices. In 2010, the pack sizes were 200g, now they are 170g. The company blamed local manufacturing cost pressures.

The brands of course have defended the bad news by claiming their wholesale prices won’t change but it’s the retailers who in fact determine the retail prices. How things would have been different if the Gobbledok was still with us…

List of recent portion size reduction:

• Doritos – 175g to 170g
• Smith’s crinkle cut chips – 175g to 170g
• Red Rock Deli chips – 185g to 165g (2014)
• Tasty Toobs – 125g to 110g
• Cadbury Freddo Frog – 15g to 12g (20g in 2013)
• Cadbury family blocks – 220g to 200g
• Cadbury Roses – 753g to 729g (25% smaller than in 2011)
• Cadbury Crème Egg – 5% smaller and recipe change
• Nestle (Allens) Killer Pythons – 47g to 24g
• Smarties – reduced by 20%

So, how should such FMCG brands innovate? Well, I don’t claim to have all the answers but perhaps a packaging redesign exercise to a cost-effective solution would be a good start. Companies claim packaging costs are increasing, so why not analyse the root of the problem first and go from there.

Secondly, how about exploring slight changes to ingredients. Companies also claimed ingredients and local produce costs are rising. Earlier this year, we noticed a slight change in the taste and texture of our office favourite, Arnotts Cheds biscuits. We took to Arnotts’ Facebook page to find out what was going on. Arnotts were courteous enough to reply and tell us they had tested various new ingredients and some consumers may notice a slight taste change. Makes sense. Instead of completely taking a consumer favourite off the shelves, refine the ingredients. We also noticed the package design had also changed slightly. You may experience a few disgruntled consumers but the overall impact should be minimal.

Thirdly, can we have some new products please? Sure the family favourites were great in the 70s, 80s and 90s but now that you’re telling us technology has changed and costs are rising, why not create products which meet the demands of today’s belt-tightening consumer world? Aldi have done a great job of introducing their confectionery products to the Australian market. Brand loyalty should always be questioned.

(In my opinion, taking a Crunchie bar for example and turning it into a family block isn’t exactly innovation. It’s just cheating.)

Many consumers have made the switch to Aldi brands after discovering great tasting products at a lower price. Double Time over KitKat? Always!

Fourthly (please bear with me on this one). Take a look at some online clothing retailers. They have a few storage warehouses where they ship their products to consumers. Lower overheads (little to no rent and power bills) and decreased physical store maintenance allows companies to focus on delivering a convenient digital experience. The online FMCG industry is still in its infancy especially in Australia. Would it be possible to have a brand such as Cadbury let’s say, one day stocking its products online instead of in supermarkets? Think about it for a second. Fewer products would need to actually be shipped to supermarkets, equating in lower packaging costs, lower freight costs, no need for in-store branding and merchandising. Also, what happens to all of the current stock which expires while gathering dust on a store shelf? Now yes there is a downside of course and I’m sure supermarket bosses would have me burned at the stake for even suggesting such a concept, but in a world of increasing manufacturing costs, factories will have no choice but to slash jobs and eventually cease production.

This is definitely suitable for companies like Kogan Pantry or Grocery Run.

I can’t remember the last time I walked into a physical store to buy a shirt or pair of shoes. Think ASOS.

I’ve seen quite a number of startups in the U.S. recently (such as Sprig, Munchery, OpenTable and Instacart to mention a few) focusing on disrupting the food/grocery delivery and restaurant experience. Such companies focus on creating a product which ‘delivers’ a great experience to ensure customers keep coming back. Food is accessible in most places during our daily lives but these startups understand it’s all about convenience and value for money. So instead of walking to my local supermarket for poor quality produce or less chocolate for my dollar, why wouldn’t I pay for a convenient digital service built purely around me and what I like?

We’ve experienced companies like GM Holden and Ford shut down manufacturing plants, leaving many without jobs. It will be a shame if the same thing happens to Australian based FMCG brands too. Such iconic brands are a part of the Australian fabric and bring back so many great memories. Needless to say, losing such icons would be a disaster.

John Isaac is the Creative Director at GMG Digital. You can connect with John at LinkedIn.