The Agribusiness World Today

Ken Shwedel
Investigador de Agronegocios de Rabobank, México
5 – 9 de Enero de 2009

The World

The incredible shrinking package. We have commented in the past, somewhat anecdotally, on examples of companies choosing to rise per unit prices by shrinking the size of their packaging rather than raise the price for the package. Now, as the result of a recent analysis by Nielsen, we can put some numbers on this strategy. According to their analysis, in the U.S., “about 30 percent of all packaged goods have lost content over the past year.” Handled right, it can be a win-win situation for food companies. What is import for companies to understand is that there is much more involved than just to put less food in a package. For example, “consumers react more to changes in height than width”. What this means is that for cereal box, they “got thinner before they [got] shorter”.

Sometimes the change in size is presented as a positive improvement. Tropicana, for example, promoted their redesigned their jug, which reduced the size by seven ounces, by saying that it was “a new ergonomic design”. Skippy’s, the peanut butter, jar was redesigned to increase the dent at the bottom of the jar “turning an 18-ounce jar into a 16.3-ounce one.” One reason that this strategy is successful is that consumers eventually they will forget about the old package and come to see the new package as the “new standard”. Nevertheless, it should be remembered, though, that “there is only so much change consumer are willing to accept”. Companies that forget this, do so at their own peril.

A possible lose in the British chocolate market. For Nestle the British premium chocolate segment seems to be a hard market to crack. An earlier effort didn’t pay off and “due to poor sales in 2006” they withdrew their Double Cream from the market. Deciding to try again they launched Heaven, a block chocolate. But once again the results have been less than spectacular. What went wrong? We don’t believe that it was the strategic focus which targeted younger women. Some analysts point to the fact that the segment was already “crowded” and Nestle´s Heaven didn’t effectively differentiate itself: “Nestle needed a novelty factor in order for Heaven to be a success.” Of course “implicitly evoking the cliché ‘chocolate is more important than men’”, didn’t really help. Probably just as important was the level of commitment that the company had to the product. Through November of 2008 Nestle “had spend £368,000…on marketing for Heaven, less than a tenth of the £3.7 million spent when it was rolled out” in 2007. In other words, success depends on more than just proper product targeting.

Mexico

Putting a seal on produce from Sinaloa. The state of Sinaloa is the major Mexican exporter of winter vegetables into the U.S. market. This year there are an estimated 68,000 hectares planted with the winter export market in mind. Of this, some 14,000 hectares are planted in tomatoes. Because of the importance of produce exports to Sinaloa’s economy the state government is setting up a certification program for exports. It seems, though, that the state’s tomato producers can’t wait. They are getting ready to launch a label that will read “Sinaloa safe tomato”. The idea is to assure consumers in the U.S. that tomatoes from the state of Sinaloa are free from harmful chemicals and disease and safe to eat. The idea is interesting, but it will need to be backed up by both an intensive PR campaign, following up on their efforts at the PMA meeting, and quality control programs.