by the SERDEF Media Bureau
(first published in the Philippine Online Chronicles, June 13, 2012)
Businesses — big and small – have resorted to product downsizing in various ways and for various reasons.
Many manufacturers downsize openly — there is no mistaking that their new packages are coming in reduced sizes and volumes — and prices. Others do subtly, with little or no price cut, as though afraid to get attention.
Downsizing to reach the prudent, low-income market
Producers would openly and legitimately downsize during uncertain times, when customers are cautious and are not in a spending mode/mood and would rather stick to a bare-bones budget.
They would downsize in order to sell to low-income markets they otherwise wouldn’t be able to reach with their bigger, more expensive packages. These are the D & E groups who would prefer to buy tingi-tingi packs which sari-sari stores, market vendors and itinerant peddlers are masters of.
Thus basic food products like sugar, pepper, flour, cooking oil, powdered milk, coffee, suka, toyo, patis, and so many others are now being sold in small sachet packs. Similarly, other basic necessities like laundry detergent, dish washing liquid, bath soap, shampoo, toothpaste, and cooking fuel have been packed in smaller sizes.
Lety’s Buko Pie did this. It used to produce the pies only in traditional 500-gram size. To go for the more prudent market, it now sells 250-gram merienda size and the 65-gram bite size versions as well.
Leticia Belarmino, who began Lety’s as a hobby and was later assisted by husband Isagani to modernize and globalize its operations, confirms that daily sales have improved through the downsizing innovation.
Downsizing doesn’t have to be physical or literal, as Fabson, Inc., biggest dealer of LPG cylinders in Iloilo, ingeniously proved.
When Fabson CEO Winston Santos found out that carinderias and low-income households preferred to use uling, on the assumption that this is cheaper, he donned his thinking cap. He reckoned the owners of the carinderia would shift readily to LPG once convinced it can be as cheap as uling and can be bought tingi-tingi.
Winston then came up with an innovative system for selling LPG by the kilo.
For convenience, he divided an area into more manageable “cells,” composed of 100 carinderia/households per cell. A collector was then assigned to go around each “cell” area to collect P20 from every carinderia owner or housewife for the LPG she consumed for the day.
Not only did Winston’s market grow through this ingenious method of retail selling; he was able to employ more people, too, who serve as collectors and get paid on commission basis.
Downsizing to cope with rising production costs
Then there’s product downsizing that manufacturers of packaged goods resort to in order to counteract high production costs. This is often done subtly and is not immediately noticed.
When costs of making the products rise, producers eventually have only two choices: raise prices or put less stuff in the package. While most are trying a price boost first, a growing number are shrinking the contents of their packages. A pack of diapers may be stuffed with only ten nappies instead of the usual dozen. What used to be a liter (1000 ML) of cooking oil to the bottle may have only 800 or 900 ML. The tub of ice cream a house wife may be buying today may have one cup less than what she got a month ago.
This is where producers should exercise caution. Downsizing can boomerang on them.