So they used the exact same size canister and just put less stuff in it? And charged the same price?? Buttheads!
This was Laura's reaction after I brought home a new can of Davis Baking Powder, pulled the old can out of our cupboard and set them both in front of her. Here's what she saw:
Note the discrepancy in net weight. The canister on the left contains 10 ounces, while the one on the right contains 8.1 ounces.
Ladies and gentlemen: this is a textbook stealth price hike. That vanishing 1.9 ounces may not seem like much, but if you sit down with your calculator and do the math, this equates to a twenty-three percent price increase.
That's right, twenty-three percent. I've railed against stealth price hikes before, but this is one of the biggest and hairiest ones I've seen.
Look, I come from Wall Street, so I'm the first person to raise the free-market argument that this company has the right to charge whatever it wants. Further, long-time CK readers know that if a company does something we don't like, it's pointless to whine, complain and give our power away.
This is why I write so forcefully here about how we consumers must empower ourselves, when necessary, with absolute brand disloyalty--especially when we see this kind of stealth price increase. We have an important obligation to call, write or otherwise give vociferous feedback so companies clearly understand our views.
After all, how can consumer products companies give us what we want if we won't tell them?
So I decided to walk my talk by writing a blunt and somewhat, uh, caustic email to the parent company of Davis Baking Powder, which is a family-owned, Indiana-based food products firm named Hulman & Co. And to my great shock (and to Hulman's immense credit), the company's executive director of marketing, Lori Danielson, spent half an hour on the phone with me explaining the company's decision.
I'm still not happy about this price hike, but I'm going to share with you the company's side of the argument. And I'm going to share it not only because it's only fair to hear them out, but also because it gives a fascinating sneak peak at the pricing and marketing strategies behind the products on our store shelves.
Essentially, there were two key reasons behind this price hike:
1) The company says customers wanted smaller cans of baking powder.
Based on feedback from customers, a full 10 ounces of baking powder was simply too much to use before it goes bad (according to the company, baking powder will keep for two years in an unopened can, and for just 6-8 months once opened). They consider an 8.1 ounce can to be a better fit for the average home baker's needs.
(Readers, there are two--maybe three--holes in the logic behind this "reason." If you can identify them, share in the comments).
2) Second, the company faces raw material cost increases.
I think most of us are aware, thanks to our country's horrendously misguided ethanol policy, that the price of corn has increased significantly in recent years. Furthermore, corn proliferates throughout our food chain in everything from animal feed to HFCS to corn starch. And guess what? Corn starch happens to be the single biggest ingredient in baking powder. Worse, prices have also increased for two other key baking powder inputs, sodium aluminum sulfate and monocalcium phosphate.
(It's understandable that the company would want to find a way to pass these price hikes on to their customers. Fair enough.)
This is the company's viewpoint, and on some levels, it's reasonable.
But there's one more thing that I've learned while researching this piece: The competitive landscape of the baking powder segment is about to change. And whether this is good or bad depends on whether you're a company selling baking powder--or a consumer buying it.
Until recently, the baking powder segment has been a quiet and uncompetitive little corner in our grocery stores. Hulman & Co.'s Davis and Clabber Girl brands dominate the segment, although there's some desultory competition from store brand products, as well as from Kraft, which owns the Calumet brand.
Now, however, a new player is looking to enter the marketplace, and reportedly, it's a new offering from Argo, the maker of the familiar cornstarch brand. This means consumers may soon be witness to ... a baking powder war.
(Put your investor's hat on and you can see that Hulman chose a brilliant pre-emptive pricing strategy: put in a huge stealth price hike now, and create some breathing room to offer price cuts down the road if necessary. You never know if Argo will come in and bomb pricing to gain market share--but if they do, Hulman can now respond by cutting prices from a much higher starting point. Well played.)
I'll summarize. The company feels justified making this stealth price hike--although they prefer using the more euphemistic phrase unit volume reduction. They've earned a ton of my respect for reaching out to me to explain their position. Further, they took great pains to make me understand how carefully they considered this decision and how they tried to balance the needs of their customers with the needs of their company's bottom line.
I understand the logic here, and I respect it. As I've said already, we live in a free market, and Hulman has the right to charge any price they want for their products.
But here's the thing: we consumers also exist in a free market, and we have the right not to be separated from our money, especially by stealth pricing techniques. And being an empowered consumer means we must exercise yet another of our rights: to find substitutes whenever the price of a product exceeds its value.
One final piece of disturbing news for any of you who claim Davis or any other brand of baking powder is superior: baking powder is a commodity. It is a standardized mix of four ingredients: corn starch, sodium bicarbonate (a.k.a. baking soda), sodium aluminum sulfate, and monocalcium phosphate. That's what makes your cornbread rise, people. Other than a heartwarmingly familiar label, there is little to differentiate this product from any other baking soda brand.
Punish all stealth price hikes. As an empowered consumer, you must let a company know, by word or by wallet, that you will not tolerate a price increase of this magnitude. Companies must compete for your hard-earned money, not take it away by stealth.
Readers, what's your reaction?
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