Beverage companies say they’re good for your waistband and your wallet: smaller bottles and cans, such as the slim 7.5-ouncers that help with “portion control,” or a new 1.25 liter bottle that hit store shelves across the Southeast this month.
The math behind the new packaging is not that simple, though.
As Coca-Cola and PepsiCo sell their drinks in smaller containers, they often charge more per ounce. It’s a subtle way for some of the world’s biggest beverage companies to raise prices, they hope, without aggravating shoppers. The bet is that shrinking packages will help Coca-Cola sell more drinks, partly by reducing the sticker price.
Coca-Cola expects raw material costs to exceed previous predictions this year by as much as $300 million, and will raise its prices 3 to 4 percent this year to compensate, partly through smaller packages. Executives have told Wall Street that more “downsizing” of containers is coming.
Little packages, like slim cans with fewer than 100 calories, are “really sellable” to consumers watching their calories, said Peter Clarke, chief executive of Connecticut-based packaging company Product Ventures.
Coca-Cola’s new 1.25 liter bottle is aimed at smaller families and folks who buy private label drinks. It sells for 99 cents, or 2.3 cents per ounce. By comparison, an average 2-liter soft drink from Coca-Cola sells for $1.32 or 2 cents an ounce in supermarkets, according to Beverage Digest.
Beverage companies say they are giving shoppers more choices. The trusty two-liter and 20-ounce bottles are not going away, after all. But Coca-Cola has said the 1.25 liter-bottle will allow it to raise prices on two-liter bottles. Higher per-ounce prices may be hard to avoid, no matter what you buy.
It won’t make a huge difference in your weekly shopping budget. But spread over millions of purchases every year, it makes a difference to Coca-Cola.
PepsiCo plans to roll out a 99-cent, 1.5-liter bottle in supermarkets this summer, Beverage Digest reported. The price of about 2 cents per ounce is basically the same as that of a Pepsi two-liter.
Downsizing is a tricky business. Many consumers felt tricked when manufacturers pushed up the indent on the bottom of peanut butter canisters, quietly trimmed the size of cereal boxes and reduced the thickness of toilet paper rolls.
Companies trying to pass along price increases are understandably loath to draw shoppers’ eyes to the net weight of packages. But if they aren’t upfront about packaging changes, the damage to brands can be immediate.
“Where the controversy comes in is when they do this packaging downsizing and they do it in a sneaky way,” said Ben Popken, managing editor of Consumerist.com. “Doing it in a way you don’t notice — that’s when consumers get ticked off. Have you ever seen that slapped on the side of a carton: ‘Now with 10 ounces less?’”
Coca-Cola and PepsiCo are not immune from backlash. A year ago, PepsiCo took some heat for cutting the package size of its Tropicana orange juice by 5 ounces but keeping the same price.
More recently, Beverage Business Insights reported that Coca-Cola’s Odwalla brand shrunk its packaging from 15.2 ounces to 12 ounces, but many retailers kept the same price. Odwalla pointed out that it had no direct control over retail prices, but some fans lashed out on Facebook and threatened to switch to PepsiCo’s Naked Juice.
Several consumer advocates say the soft drinks industry is generally adding its latest wave of new packages the right way. No one would mistake a mini-can for a standard 12-ouncer, or a 1.25-liter bottle for a two-liter.
“There’s nothing hidden,” said Katie Bayne, president of Coca-Cola North America’s sparkling beverages division. “It’s all under the packages.”
For years, the U.S. soft drink industry depended heavily on three packages: 2-liter bottles in supermarkets, 20-ounce bottles in convenience stores and 12-packs of 12-ounce cans. The simple approach was efficient, but it doesn’t work for today’s consumers, Bayne said.
A 16-ounce bottle that Coca-Cola started selling from coolers several years ago was geared toward teenagers who had a dollar in their pocket but didn’t want to pay for a 20-ounce bottle, which in some cases was just too much liquid or too much money. The 16-ounce bottle retails for 99 cents or 6.2 cents per ounce. A 20-ounce bottle sells for an average of $1.39 or 7 cents per ounce.
“The beverage business was overly reliant on too few soda packages,” said John Sicher, editor of Beverage Digest. If beverage companies give consumers more choices in size, configuration and price, “they’ll help make the category healthier.”
Coca-Cola hopes the bevy of choices will boost “immediate consumption” — grabbing a Coke from the cooler and drinking it, as opposed to storing it in the fridge or closet. It credits smaller packages, such as the 16-ounce chilled bottle, with recruiting new drinkers used to spending 99 cents on music downloads.
Some markets are well ahead of the U.S. in packaging variety. In Mexico, which has the world’s highest per-capita consumption of Coca-Cola products, some retailers carry as many as 14 different packages of Coca-Cola, a much wider variety than in the U.S.
Coca-Cola and PepsiCo are shrewdly trying to bring the strategy home, said Gerry Khermouch, editor of Beverage Business Insights. Getting consumers to pay more per ounce, in a weak economy and as overall sales of soft drinks are down, is “no mean feat.”
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How we got the story
Staff writer Jeremiah McWilliams walked the aisles of local supermarkets and convenience stores, interviewed executives and consumers and read research from beverage analysts, trade journalists and consumer pollsters. He listened to conference calls and studied circulars from a variety of retailers around the country.
