September 11, 2008

Shrinking Boxes, Pricier Foods Fluster Parents

By EMILY FREDRIX / Associated Press

Children may be worried about homework, teachers and that pesky bully this school year. But parents? They're leery about lunches.

With food prices rising and packages shrinking, parents are wondering how they'll stretch their food budgets.

Some children will eat more hot lunches this year. Some will carry baggies full of snacks like home-packed chips and crackers rather than prepackaged ones. Maybe there will be more peanut butter -- if it hasn't been banned in school due to allergies -- instead of lunch meats, or cheaper items, such as Spam.

This year's lunchroom will be less about convenience and more about the bottom line, said Marcia Mogelonsky, senior research analyst with Mintel International in Chicago. Parents will be shopping for deals but still wanting all the basics -- fruits, veggies, proteins and fun things, such as chips and cookies. It won't be easy, she said.

"Parents are sort of entering this with trepidation," she said. "It's not how much it costs. It's how much more it costs relative to what they're used to spending."

The costs for key ingredients -- such as corn, wheat, soybeans and other items -- are high and eating into food companies' profits. So big names like Kraft Foods Inc., Sara Lee Corp. and Hormel Foods Corp. are passing along price increases as they try to keep making money.

Some companies are also shrinking products or getting rid of certain lines to lower their costs. Skippy peanut butter, made by Unilever, now sells in 16.3-ounce jars that look the same size as the previous 18-ounce jars because of a larger indentation at the bottom. Kraft is reducing the number, and in some cases the size, of items in its Deli Selects cheese line. Sara Lee has reduced the size of some of its Hillshire Farm deli meat packages from 10 ounces to 9 ounces.

The prices, for the most part, don't go down.

The cost of food is soaring. In the U.S., retail food prices rose an average of 6 percent this year. That's three times the normal inflation rate. Prices are rising because companies are paying more for key ingredients, due to increased demand around the world, the weak U.S. dollar and weather that destroyed crops.

The pinch consumers are feeling is affecting their shopping habits, said Harry Balzer, vice president of consumer research firm NPD Group and an expert on American eating patterns.

"These rising food costs have to be paid for by somebody," he said. "The question is, how are you going to pay for them? Are you going to pay for them in keeping your out-of-pocket cost constant by buying smaller portions, or are you going to be paying more for what you paid last year?"

People typically spend 10 percent of their income on food and that won't change, he said, so instead they're looking for deals, eating less or changing brands.

Mogelonsky said many parents will have to put more thought into what they're giving their children. Lots of changes will be in the snack realm, she said, because people are more price-sensitive for snack foods.

One way many parents will save is to stop buying prepackaged snacks, especially the 100-calorie ones that hit the market a few years ago, Mogelonsky said.

Children should probably expect to see fewer treats this year, as well, she said, since that'll be seen as a luxury. Parents will have to talk to them about what they want to eat and why -- and explain why those cookies may be gone this year.

"It's a good time to teach economics, nutrition and budgeting. It could become a major focus in parent-child relations, making lunches," Mogelonsky said.

And if people cut back on their food spending, they may end up eating better, she said.

A look at how some foods are shrinking

Many food items have been shrinking as companies try to make up for higher ingredient costs. The companies are also raising prices, but making products smaller gives them another way to make up the difference. At the same time, though, customers are getting less food--and they're not paying any less.

Here's a look at how some big-name products are shrinking:

Cereals: In June, Kellogg Co. said it was shrinking, by an average of 2.4 ounces, the packages of 14 items sold under the brands Apple Jacks, Cocoa Krispies, Corn Pops, Froot Loops and Honey Smacks. Rival General Mills Inc. more than a year ago shrank some of its boxes, including Cinnamon Toast Crunch and Trix.

Orange juice: Large jugs by Tropicana are now 89 ounces, down from 96 ounces. The company is part of the PepsiCo Inc. family of products.

Peanut butter: The Skippy brand, made by Unilever, now sells in packages of 16.3 ounces, down from 18 ounces.

Deli meats: Some packages of Hillshire Farms deli meats, made by Sara Lee Corp. are now in 9-ounce tubs, down from 10 ounces.

Mayonnaise: Certain Jars of Hellmann's, also by Unilever, are now 30 ounces rather than 32 ounces.

Margarine: Some Country Crock tubs, by Unilever as well, are now 45 ounces, down from 48.

Ice cream: Certain packages of Breyer's, also made by Unilever, and Edy's, by Dreyer's Grand Ice Cream Holdings Inc., are now selling in 48 ounce cartons, down from 56 ounces.

Chocolate: Mars Inc. plans to decrease the volume of some of its package types. It makes Snickers bars and M&M candies, among other brands, and hasn't announced specifics.

Gum: Wm. Wrigley Jr. Co. now sells brands like Juicy Fruit, Big Red, Doublemint and Winterfresh in 15-stick packages , down from 17.

Source: The Associated Press and Edgar Dworsky, editor, Mouseprint.org.