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Natural Foods Merchandiser

Rising commodity costs put pressure on natural manufacturers

An increase in food and commodity prices are forcing natural and organic food companies into an unavoidable dilemma: raise the price of their products or charge the same amount for smaller portions. And where does transparency fit in?

An increase in food and commodity prices are forcing natural and organic food companies into an unavoidable dilemma: raise the price of their products or charge the same amount for smaller portions.

The choices are made more difficult in an industry that prides itself on transparency.

The U.S. Labor Department reported that food prices rose 3.9 percent in February – the biggest one-month jump in nearly 40 years – due to rising commodity prices, regional freezes, international demand and higher transportation costs.

Natural and organic food companies, having already gone through several cycles of absorbing costs, are pushed to the limit. Yet they know that recession-weary consumers, loyal as they are, will have to make choices, too.

“Most companies do everything they can to keep price points,” said Jerry Shafir, founder and president of Chelsesa, Mass.-based Kettle Cuisine, maker of frozen natural soups, stews and chilis. “We do everything we can to avoid raising prices and improve efficiencies. But in some cases, we don’t have any choice but to pass the price increase along.”

Some conventional companies are camouflaging those increases by selling smaller portions in smaller packages. Some canned vegetables dropped from 16 ounces to 13 or 14; boxes of pasta shrank from 16 to 13ounces; bags of chips, crackers and cookies hold 15 to 20 percent less than they did before – all at the same or even higher prices, according to a story in the New York Times.

There’s nothing new about cutting the size of products. “I saw it in coffee years ago, when they went from a pound to 12 or 13 ounces. And they got away with it,” Shafir said.

Shafir said that’s not something customers will see from Kettle Cuisine, whose website states “We will remain honest and transparent in everything we do.”

“My gut hates companies that try to sneak it in,”Shafir said. “In natural food especially, there’s got to be more transparency.”

In addition, he said, “there’s a visceral reaction. You can see the lesser portion.  Maybe with coffee, it’s one scoop at a time and nobody notices. But with single-serving meals, you’re going to see a smaller amount in the bowl. If you make a shallower bowl, the customer isn’t as full.”

Trish Hansen, a buyer for Marlene’s Market and Deli Natural Foods in Tacoma, Wash., said she’s seeing packages of frozen fruits, vegetables and French fries that contain fewer ounces. But she also points out that some smaller natural food companies that have been bought out by larger conventional companies are substituting cheaper ingredients without notice as well.

“They change the packaging. They change the ingredients to things like regular processed sugar, preservatives like autolyzed yeast extract, GMOs,” Hansen said. “But they don’t change the price, and they don’t tell us about the changes. They might offer a lower price to begin with, but after a short time, they jack the price right back up. It’s sneaky. We’re trying to get transparency from these companies.”

Doug Frank, the store manager at Rainbow Acres in Los Angeles, said he’s seeing smaller portions of ice cream, cereal and cookies. “But we don’t get a lot of grief from our customers. Everybody is aware of it. People are so focused on the dollar amount. They’re more concerned about what they pay for the item than whether it’s two or three ounces less. Natural food shoppers will put up with that.”

Most companies that make smaller packages “fly under the radar. Or they market it as ecological packaging--they try to put a ribbon around it,” Frank said.

Making smaller packages is nothing new, but marketing them as environmentally friendly is, said Bob Vosburgh, group editor of Supermarket News. Both conventional and natural food companies are touting shrinking packages sizes by saying “we don’t want to raise the prices on you and we’re being a greener company. It softens the blow.

“Whether or not it’s ethical to do that, I can’t say.” 

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