Food manufacturers, like the politicians currently debating health reform, may have a solution to the obesity crisis: Feed Americans a lot of hot air. But this heated air is not just a figure of speech for packaged goods companies including Ralcorp Holdings' (RAH) Post Foods and PepsiCo (PEP) subsidiaries Frito-Lay and Quaker.
In many packaged products, as much as 50% of the contents is just empty space, an investigation by Consumer Reports reveals. And we consumers are buying that nothingness every day.
What's more, apologies and package reformulations are not forthcoming. Federal standards regulating package size are full of loopholes. And the fact that companies all have different reasons for having so much so-called "slackfill" in their packaging suggests that consumers may not be getting the full story.
Why would manufacturers make a package that's twice as big as the lump of food inside? Simple human behavior is the answer. We have all been guilty of grocery-shopping in exactly the manner food manufacturers want us to: Scanning shelves quickly and making decisions based on simple, caveman-like visual cues. Bright colors: Grunt! Picture of food delicious: Ungh! That one's big: Slurg! How often have you picked a cereal box or package of potato chips based solely on the size of the bag relative to its price?
Yes, food makers know this, and they've been savvy about responding to consumer complaints with plausible-sounding explanations. In response to the Consumer Reports investigation of under-filled packages, Frito-Lay says Classic Lays potato chip packages are only filled half-way to prevent breakage.
Meantime, Post Foods said its Shredded Wheat boxes were 2/3 full because of settling during shipping. The two companies' rationales are deemed to be reasonable by Consumer Reports' editor Tod Marks.
The Consumer Reports investigation relied on reader reports and selected a "representative" sample that excluded "egregious" examples of what the organization is calling black-hole packaging. There is nothing illegal about making one's bag or box twice as large as the space needed to store what's inside.
But take take products such as a container of multivitamins. It's hard to gauge a package's fullness based on its weight or sound when it's shaken. But when consumers end up opening the package at home and the thing is far from full, customers end up with a decided feeling of deception.
Certainly, packages must display the actual weight or, in the case of vitamins, the number of capsules, on the package front. This does not mean that consumers are carefully comparing these numbers. I've even noticed recently that per-unit prices listed on some in-store price signs are based on different units for similar packages; one is per ounce, another per pound or kilogram.
And there are laws -- the federal Fair Packaging and Labeling Act -- meant to protect the public from misleading packages "containing excessive 'slack fill,' nonfunctional or empty space that creates an illusion of more product, often through underfilling, indented bottoms, or extra walls," says Consumer Reports in its news release. The act reads, "a package shall be deemed to be nonfunctionally slack-filled [and deceptive] if it is filled to substantially less than its capacity for reasons other than (A) protection of the contents of such package or (B) the requirements of machines used for enclosing the contents in such package."
In other words, manufacturers are allowed to cite a raft of possible reasons that food packages look far bigger than they should. One product cited by Consumer Reports was Mars, Inc.'s Uncle Ben's Fast & Natural Whole Grain Instant Brown Rice. Two company representatives gave the magazine different reasons why the bag within the box was only half full.
First, a customer service representative said "rice needs to breathe." Wrong, said another company rep: The outer package "may appear larger than required" because otherwise it wouldn't have a "quality seal," the representative told Consumer Reports. Why do other products need far less airspace for the quality seal, you ask? There's no telling.
The fact is that the Fair Packaging and Labeling Act is, while infused with laudable goals, does not seem to protect consumers as equally as food manufacturers as consumers. What else do we have other than the word of manufacturers that a package was designed for a product's "protection" or "the requirements of machines" and is therefore outlandishly oversized? Nothing, really, and it's highly unlikely manufacturers will ever be brought to task by the FTC for such a relatively minor deception.
Consumers can do this: bring the products home, open them up, and widen their eyes in disbelief. We've all done it, and while it surely frustrates many of us, we're likely to go back and buy the same product again.
The truth, the one that the food manufacturers also know, is that we forgive easily and, after all, everyone else is doing it.
Introduction to ETFs
The basics of Exchange Traded Funds and why ETFs are hot.View Course »