Tostitos and Ruffles reduced the sizes of their chip bags, resulting in an unfavorable outcome.
The proprietor of Lay's, Doritos, Tostitos, and Ruffles crisps is planning to boost the chip quantity in certain bags to entice back customers disgruntled by the hike in prices and the decrease in bag size. Customers have been resistant to the diminished chips, cookies, paper towels, and other products, which is commonly referred to as shrinkflation, and have either opted for cheaper alternatives or ceased purchasing altogether.
A representative from PepsiCo informed CNN that Tostitos and Ruffles will include a 20% higher chip count in certain locations for the same price as regular bags. Additionally, two extra smaller chip bags will be added to PepsiCo's variety pack with 18 bags, according to the spokesperson.
"It's the football season. There are numerous gatherings," PepsiCo CEO Ramon Laguarta stated during a recent earnings call.
This is a shift from the continuous reduction in bag size for Tostitos, Ruffles, and other crisp brands.
In 2021, Edgar Dworsky, a consumer protection lawyer and founder of Consumer World, who diligently monitors shrinkflation, discovered that Tostitos’ "Hint of Guacamole" version had shrunk by one ounce from 12 to 11 ounces, while its "Hint of Lime" version decreased from 13 ounces to 11. Dworsky also found that Ruffles had trimmed half an ounce from its "Sour Cream & Onion" bag in 2013.
"It's about time," Dworsky said regarding PepsiCo's decision. "Chip enthusiasts have endured years of downsizing."
PepsiCo, the largest salty snack manufacturer in the United States, is expected to inspire its competitors to offer larger bag sizes with their own increases, as suggested by Robert Moskow, an analyst at TD Cowen.
Decreasing sales, rising prices
PepsiCo is implementing these changes due to consumers, impacted by inflation, purchasing fewer snacks. When they do, they often opt for less expensive options from retailers like Walmart and Costco.
During the third quarter of 2024, snack sales declined by 0.5% compared to the same period the previous year, and retail snack volumes decreased by 1.1%, according to research by Bank of America analysts.
PepsiCo's snack sales decreased by 1% in the last quarter and its snack volumes decreased by 1.5%.
Snack prices have escalated faster than other merchandise.
The price per ounce of salty snacks has risen by 36% compared to 2020, surpassing a 21% increase in overall grocery store prices, Moskow said.
The average price for a 16-ounce bag of potato chips was $6.46 in September, while in September 2020, the average price was $5.02, as per the Bureau of Labor Statistics.
Consumers and legislators have voiced their discontent in recent years over businesses shrinking products while simultaneously raising prices. Everyone from President Joe Biden to the Cookie Monster has denounced shrinkflation.
PepsiCo, General Mills, Mondelez, and other snack giants have heightened promotions to try to regain customers, but these promotions have been ineffective, according to Bank of America.
Other companies are also attempting to address consumer frustration with shrinkflation.
Domino's recently introduced a limited-time offer called "Moreflation." Customers who ordered two or more medium two-topping pizzas could upgrade one of their pizzas to a large for free.
"Consumers are becoming increasingly dissatisfied with receiving a smaller portion for the same price," Domino's finance chief Sandeep Reddy said during an earnings call last month.
Given the current market situation, many businesses are facing decreasing sales and rising prices, leading customers to opt for cheaper alternatives. PepsiCo, recognizing this trend, is now increasing the chip count in certain bags of Tostitos and Ruffles to provide more value to its customers, aiming to combat the impact of shrinkflation on sales.
