Thursday, January 31, 2013

The sneaky price hike - downsizing products to upsize profits hurts nonprofits.

The sneaky price increase hurts nonprofits, and the rest of us too.  Warning – this is going to look like, sound like and smell like a rant.
I buy a certain store brand of cereal.  Yes, it’s cheaper than the name brands, but it’s also better-tasting.  And like most shoppers I sort of casually register the price as I pick up a bag.  A couple of days ago, I grabbed a bag and my hand knew what the price tag didn’t say…there’s less cereal in here!  When I got it home I looked and sure enough, there was four ounces, or 12.5% less cereal.  It’s still sold for $3.29, but in reality, it now costs $3.70 per bag.  That doesn’t just cost more in price per ounce.  I will now run out of it sooner, so I will have to spend the time and money to drive down and buy it more often, assuming that I keep using the same amount at each meal.

This has been going on for decades.  I first noticed it some twenty years ago, when a certain feminine product suddenly only had ten items per box instead of twelve.  Same size box, same price but they cost more at the per/each price.  Then it was tuna fish, which went from 6 ounce cans to 5-1/2.  Three pound cans of coffee went to 32 ounces in the same size can, and on and on.

The point of this is, not only does inflation cheapen the buying power of the dollar, so that it takes more dollars to buy something, but the sneaky price hike lessens the quantity of the product received.  As far as I can tell, this isn’t ever reflected in the Consumer Price Index, which is how government tries to tell us whether we are losing ground in terms of buying power.  It skews the already unrealistic “facts” about what our dollar buys.

How does this affect nonprofits?  Well, if you are a food pantry that normally buys a bag of that cereal, expecting that it will provide one week’s breakfasts for a family of four, now you have to buy more bags, or fill in with some other type of breakfast food.  And the chances are, you don’t even notice it, so you don’t even mention to your clients that they need to use less per meal to make it last a week.  Ergo, the budget you had carefully crafted for purchased food items just doesn’t go far enough.

So, if you are a nonprofit that is suddenly finding that the products you buy don’t seem to be achieving the same results, it’s very likely that sneaky price increases may be the reason.  At least if the manufacturers and retailers would just raise the darn price, you could make informed decisions.  I get that there are serious cost pressures on businesses.  If you have to raise the price to stay in business, I get that.  Just don’t cheat me and then expect me not to notice.  Just price it where you have to and at least we would have honest information about the buying power of our dollar. 

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