When the Chips are Down

I have to say that the plunging math scores from American children seem to have been perfectly timed for the harsh economics surrounding the rise in commodities prices. We all know about gasoline and Middle Eastern instability. But cotton? In September of 2010, a pound of cotton costs a dollar. In March of 2011, it was $2.26 a pound. The price of corn has doubled in the last year to $7.50 a bushel.

The March 30^th Bloomberg.com also reported some interesting figures on commodities: “Coffee jumped more than fivefold in the two years through July 1994 and more than tripled from February 2002 to March 2005. Sugar prices rose fourfold from June 2002 to February 2006 and more than tripled from June 2007 to February last year. Cocoa advanced 242 percent from December 2000 to January 2003… Coffee, sugar and cocoa prices will rise five- to 10-fold by 2014 because of shortages that will mean consumers getting ‘swamped’ by food-price inflation, according to Superfund Financial…

“‘There’s a tremendous shortage of food, there’s a tremendous shortage of arable land,” [Aaron] Smith [managing director of Superfund Financial (Hong Kong) Ltd. and Superfund USA Inc, which holds significant commodities futures] said in interview in London. ‘Any kind of food products are going to increase.’” Well, yum! Anyone for a serving of over-population topped with a whip of desertification plus a global climate change chaser with that?

So what’s an industry to do? Mark up common items by vast multiples and watch the startle effect drive customers away? Or is there a better, perhaps more diabolical approach that takes advantage of the fact that most consumers don’t actually read labels and probably can’t do the math on the reduced quantities anyway? How about packaging that kind of sort of looks like the old bag, sack, can, bar, box or wrapper but actually contains less of the proffered product? Who’ll notice?! Not kids educated in our school systems, it seems.

The April 11^th DailyFinance.com did a size reduction analysis on popular brands and the packaging, and here are a couple of the “facts” they discovered. Kellogg’s cereal has dropped its Special K box by 15% or 2.4 ounces on average… and the price went up too. Guess it won’t be so special anymore. Won’t have as much to snicker about as Mars reduces their king-sized Snickers Bar candy bars by 11% (0.41 ounces) but keeps the price the same. Pepsico’s Tropicana Orange Juice “increased the price of its gallon jugs by 5-8% and stealthily reduced the size of its half-gallon cartons from 64 ounces to 59 ounces. This 5-ounce reduction represents nearly an 8% decrease in size.” General Mills’ Haagen Dazs is dropping 12.5% (2 fluid ounces) from a pint of its lovely ice cream. Pepsico’s Frito-Lay chips are contracting a mighty 12.5%-20% (more for corn chips, less for potato), but a Reece’s mini is falling by a whopping 31%! No piece of mind there! The Chicken of the Sea isn’t carrying the same tuna, shriveling 17% ( a full ounce).

DailyFinance notes it most certainly isn’t just food: “Proctor & Gamble recently cut the size of its Bounty 2-ply paper towel rolls from 138 sheets to 128 sheets. The company attempted to mask this change by advertising the roll as ‘25% thicker.’ Despite the increased thickness, the package reportedly weighs less. Proctor and Gamble competitor Kimberly-Clark has also reduced the size of its ‘Scott’ paper-towel rolls.” While I know this is an absorbing topic, folks who leave paper trails will be just a little bit harder to find. When you add all this up, the dollar buying less, unemployment still pretty high, home prices don’t seem to be moving up… well, kinds makes you want to… er… go limp and have mommy carry you home!

I’m Peter Dekom, and all this constant chipping away at our standard of living is getting to be a really gigantic piece of chip!