Inflation Watch: The Incredible Shrinking Coke Can

Tyler Durden's picture

U.S. soft drink companies are increasingly shifting to "mini-cans" in an apparent strategy to help the poor obese people of the world manage caloric intake better. Mini-can sales are up 3% as the rest of the industry is in demise. All sounds great... However, as Reuters notes, the reality of the shift toward smaller cans "is almost the industry admitting that volume is not going to be growing very much." Simply put, it is one way that companies can drive higher prices and larger margins: Consumers may feel as though they’re buying a cheaper, smaller soda, but they are often paying more per fluid ounce. But do not fear, inflation is contained.

 

As Reuters reports, soft drink firms strategy is propaganda'd as helping manage health...

About a year ago, Texas rancher George Krueger worried about his weight, and decided it was time to downsize - his Coke cans, that is.

 

Like increasing numbers of U.S. consumers, Krueger bet that by switching from regular-sized soda cans to 7.5 ounce "mini"-sized ones, he could make a dent in his daily calorie intake.

 

“It’s kind of a happy medium,” said the 62-year-old, who generally drinks a can a day, but sometimes goes for an extra one for more caffeine. “I can have my sweet fix but not feel guilty for having so much.”

 

U.S. soft drink companies are betting that soda drinkers like Krueger and their willingness to buy smaller cans, even for a higher unit price, will be a potential antidote to weak sales as consumers shift away from sugary soft drinks.

 

The mini-can is the latest move by food and beverage companies to boost their product offerings of smaller portion sizes that supposedly help consumers limit their caloric intake - even if there are signs that some end up reaching for another package or can.

 

Mini can sales grew 3 percent in 2013 while the rest of the carbonated soft drink category dropped, according to market research firm Euromonitor International.

 

Pepsi’s mini can business in the United States has grown 24 percent year-to-date in 2014 and was up 34 percent last year. The company said that this year, it has also seen a significant increase in the number of in-store displays of mini cans.

But the reality is... it's about rising costs and managing margins...

The shift toward smaller cans “is almost the industry admitting that volume is not going to be growing very much,” said Ali Dibadj, a beverage analyst at Sanford C. Bernstein.

 

It is one way that companies can drive higher prices and larger margins: Consumers may feel as though they’re buying a cheaper, smaller soda, but they are often paying more per fluid ounce, analysts said.

 

Indeed, there is a price difference between mini cans and regular cans at retail. At a Fairway grocery store in Manhattan last week, 7.5-ounce cans of regular Coke and Pepsi were $4.49 for an eight-pack. Twelve-ounce cans, on the other hand were $4.89 for a 12-pack. That works out to roughly 7 cents per ounce versus 3 cents an ounce.

Of course, the reality is - consumers are drinking the same amount (more small cans) at a higher price...

“Studies show that people drink whatever package it comes in,” she said.

 

That’s not necessarily the case with all food products, such as 100-calorie snack packs. A 2008 study by Arizona State University researchers found that dieters actually consumed more of the food in smaller packages than they would if it was regular sized.

 

Krueger, the Texas rancher, hasn’t lost weight as a result of the mini cans but said they are likely keeping him from gaining more bulge.

 

“If I was really sensible, I wouldn’t drink them at all, but I just love the taste," he said.

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"That works out to roughly 7 cents per ounce versus 3 cents an ounce." - Nope, no inflation here...