Groceries shrink as firms try to claw back cost increases

The size of some the UK's best-loved products has been secretly shrunk without any reduction in price, as manufacturers desperately try to claw back soaring inflationary costs.

Manufacturers have reduced the size of products including a Cadbury's chocolate bar, Kraft Foods' Dairy Lea triangles and Nestlé's Rolo, but the price of the products sold in supermarkets has remained the same.

Non-government organisations are worried that consumers are being hoodwinked into paying more for products at a time when household budgets are being hit by spiralling fuel, petrol and food prices, as well as falling property prices.

Jeff Allder, policy expert at the National Consumer Council, said: "We are extremely concerned to hear about goods shrinking in size without shrinking in price, as it cheats unsuspecting shoppers already under financial pressure from rising household and motoring costs. In America, it is known as the Grocery Shrink Ray and this is one trend from the US that we definitely don't want too much of over here."

Some of the world's largest food and drink manufacturers said that the smaller pack sizes are a response to soaring prices in supply chains, such as rising dairy, oil and energy costs.

A Cadbury's spokesman said: "We seek to keep our confectionery affordable in order to offer our consumers value for money, and therefore we have slightly reduced the size on some of the larger sharing packs rather than directly raising prices."

The size of a Cadbury's Family Share chocolate bar has been reduced from 250g to 230g, but the price has not changed.

Mark Gerken, managing director of off-trade at Scottish & Newcastle UK, said the decision in May to sell fewer cans of Strongbow cider in a pack, without changing the price, was taken after consultation with retailers.

He said: "The decision to introduce a new 15-can pack of Strongbow was brought about by our need to raise wholesale prices – in face of the widespread and unprecedented rise in business costs – and retailers' desire to continue to offer Strongbow in a similar party-pack format at the same price point. Had retailers not chosen to go down this route, they would have had to pass on a hefty price increase to purchasers of the old 18-can pack, and they clearly feel no price increase on a smaller pack offers better consumer value."

Grocers argue that they are merely passing on the prices that manufacturers charge them for reduced pack sizes, and if they cut prices on the shop floor it would hurt their margins.

A source at one of the big four said of reduced sizes for the same price: "It is happening." But the source said that there were no plans to introduce the same policy on their own-label products.

However, Waitrose has reduced the size of a pack of minced beef from 550g to 500g, while keeping the price the same, because of the rising costs of food coming out of farms.

A Waitrose spokeswoman said: "We have reduced our mince pack size slightly. However, we have absorbed a significant amount of the farm gate price increase."

Mr Allder warned that food producers need to be wary of damaging their brand. He said: "Even in a credit crunch, most customers are savvy enough to see these tactics as underhand. Companies should realise that, once caught out, their corporate reputation could suffer and customers always have the power to switch brands."

Retail sales fall 0.9% to extend slump

The true scale of the downturn hitting the retail sector was laid bare yesterday, when it emerged retail sales fell again in July.

Like-for-like retail sales fell by 0.9 per cent, which means they have been lower than a year ago in four out of the past five months – the worst run of figures since the summer of 2005, the British Retail Consortium found.

The figures put down an ominous marker for the run-up to the critical Christmas period, and few in the sector expect consumer spending to improve until next year at the earliest. The BRC's director general, Stephen Robertson, said: "Frivolous shopping is off the agenda as most customers concentrate on value and durability, and there are few signs the slowdown has yet bottomed out."

Sales in the clothing and footwear sector fell further below the year-earlier level, and furniture and homeware retailers show little sign of emerging from their prolonged slump – despite continued discounts and promotions.

KPMG's head of retail, Helen Dickinson, does not expect conditions in the retail sector to improve this year. "Without exception, all the retailers I am talking to are not optimistic at all."

Food and drink retailers were the only companies to register significant growth last month against a weak July 2007.