Sunday, July 28, 2013

There is inflation going on in your toilet paper right under your, err, eyes...See here how you are getting short changed...

Nice examples of "hidden inflation" in this article.  If a producer reduces the size of the offering in a good but charges the same price as before, well, you are getting less of the product for a higher price if you look at it on a per unit basis (sheets of tissues, ounces of cereal, etc).

However, this could be offset if there is measurable quality improvements in the product that compensate for the reduced quantity.

I think the inflationary effect of decreasing the quantity is stronger than the moderating effect of quality improvements.  That is just a hunch based on the fact that one  is very easy to measure (how many sheets are there in a roll, box, etc) and the other is more subjective (how much does this improve my restroom experience).  Yikes! I don't really want to do that marketing experiment.

Toilet-Tissue 'Desheeting' Shrinks Rolls, Plumps Margins

Improved Product Means Fewer Sheets Needed to 'Get the Job Done,' Company Says

Kimberly-Clark Corp. KMB -0.08% recently rolled out new Kleenex tissue that it says is 15% "bulkier."It's also stingier. Each box has 13% fewer sheets than before. 
Consumer products makers call this "desheeting"—reducing the number of sheets of toilet paper or tissues in each package while holding retail prices constant. Earlier this week, Kimberly-Clark executives told analysts that they expect the practice to benefit the company's consumer-tissue unit in the second half of the year. 
Companies, particularly in the food business, have long shrunk packages as an alternative to hiking prices in the face of higher raw-material costs. Cereal boxes and bags of chips have in many cases become lighter over the years in what the food industry refers to as taking "weight out." A regular Snickers bar now weighs 1.86 ounces, down from 2.07 ounces in the past, which Mars says was done to cut calories to 250 per bar. Tropicana Pure Premium orange juice is now sold in 59 ounce bottles, versus 64 ounce cartons prior to 2010. 
The practice also has been a tried and true strategy for makers of tissue and toilet paper, allowing companies to quietly, and effectively, raise prices per unit.

Note: I do understand the difference between inflation and an increase in prices, especially if it is just one good/service or even a group of goods/services.  Just wanted to point out the difficulty and potential pitfalls in the way the government calculates the overall inflation rate.

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