China Consumer

Not a lotta bottle

If you can’t raise the price, the solution is to reduce the size of the product

The bottles have got smaller...

When Ms. Fan, a shopper in Shanghai, opened the bottle of fruit yogurt, she was surprised to find that it only filled two-thirds of the container. Not that she complained too much. “This is not that bad,” Fan told Xinmin Evening News. “Last year I bought a box of beef jerky and found a thick piece of cardboard in the middle of the box”.

But other Chinese shoppers are starting to complain, especially about getting a lot less for their money. The reason? Companies have been trying to camouflage price increases by selling their products in smaller packages and hoping people are not reading the labels too closely.

Coke was one of the first companies to change to smaller packaging. “We only had 600ml bottles last year. This year we will change it to 500ml,” Luan Xiuju, managing director for China Foods, owner of Cofco Coca-Cola Beverages (one of the three Coca-Cola joint venture bottlers in China), told the Wall Street Journal. “I don’t think most consumers will notice this change.”

Coke says it is running down its inventory in the larger bottle, and will only replace stock with the newer, smaller one. The average price customers paid for its newer product effectively increases 5% to 6%.

Pepsi soon followed suit by reducing the size of its own bottles to 500ml from 600ml while keeping prices unchanged. Dairy company Yi Li has dropped the size of its milk packets by 20ml to 200ml, and back in February beverage and instant-noodle brand Master Kong reduced juice bottles 50ml to 450ml but kept the price the same at Rmb2.7.

Trying to divert consumer ire, some marketers justify the new packaging on green grounds. Coke claims shoppers have been supportive of the smaller packaging because it is more environmentally friendly, says Xinhua.

Others have resorted more to optical illusion: maintaining the same height and width of packaging but changing its depth so the silhouette of the product on the supermarket shelf looks the same, despite the reality of shrinkage.

Sometimes more air is pumped into container packaging or a scoop is dug into the bottom of a can, says Xinhua.

Analysts say changing the packaging while maintaining the price is a safe move as consumers are generally more sensitive to changes in prices than to changes in quantity.

“Size reductions in China are a way for companies to absorb cost increases without gaining too much attention,” Torsten Stocker, a Hong Kong analyst for consulting firm Monitor Group, told the Wall Street Journal. The changes are “at the level that doesn‘t get noticed much by consumers”.

Companies have also been offerring slightly different product versions to mask direct comparisons. Oriental Morning Post says Dove’s new chocolate caramel ice cream bars now cost Rmb5.7, versus Rmb3.2 for classic chocolate. Kaeido, a local ice cream brand owned by Unilever, used to charge Rmb15.9 for 6 ice cream cones, but its new flavours have also become more expensive at Rmb18.7 for four.

Industry observers say producers have little choice in reducing product sizes in the face of rising raw material prices. As we have written previously in WiC, firms have been warned not to increase prices for everyday items as part of governmental efforts to enforce price controls and rein in inflation.

Unilever was recently fined $310,000 for mentioning to reporters that it was even thinking about raising prices – news which then sparked a rush of shampoo-buying in March (see WiC106).

But in spite of that bad experience the Anglo-Dutch multinational looks to have concluded that a price rise makes more sense than tampering with package sizes. According to the Guangzhou Daily, Unilever has this week gone ahead and raised the price of its shampoos Lux and Hazeline by an average of 10%.


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