SIZE MATTERS 1999-09-13

David Merrefield

How things can get turned around: "Shoppers who believe they always get a better deal when they buy a bigger size may be getting fooled."

That quote constituted the lead paragraph of a news article distributed nationwide by the Associated Press, and which appeared in countless newspapers around the country.

The burden of the news article was that, owing to manufacturer "surcharges," supermarket shoppers pay more per unit for certain large-size packages -- chiefly cans of tuna -- than they do for small-size packages, a notion that stands common expectation on its head.

The widely propagated news article was based on a study by a couple of academicians from Purdue University, which was presented at a meeting of agricultural economists.

I have a feeling this whole notion of unit prices rising in tandem with package sizes will be around for quite a while, even though it should be immediately put to rest. This concept is just too tempting. After all, news stories claiming that high-margin product is placed at eye level still persist. That idea -- whether true in everyday practice or not -- probably dates to the "Hidden Persuaders" era of the late 1950s.

In any event, the proximate claim is based largely on prices of canned tuna. One of the study's authors told the AP he was able to buy a 6-ounce can of tuna at a Kroger store for 89 cents and a 12-ounce can for $2.19. That means a shopper would pay a 41-cent premium for buying the larger size. This is the long and short of the entire study. (See the news article on Page 47 of this week's SN.)

Let's take a closer look at the Purdue study. Strangely, the study cites some very old data. The idea of manufacturer surcharges is documented in a footnote, which cited a bulletin article published in 1957. Other data came from SAMI, the product-tracking service that folded its tents years ago. But newer data is cited too, such as ACNielsen Scantrack numbers from 1988 to 1995. The scanner data suggests that a 40% per-unit surcharge exists on large cans of tuna, the Purdue study maintains.

Does this mean that some sort of size surcharge pertains, and that consumers are ill served by the food-distribution chain? It does not. As Tim Hammonds, president and chief executive officer of the Food Marketing Institute, told SN, "The pressure of 'publish or perish' causes university professors to do strange things. These professors never talked to a single real shopper in putting together their study. In fact, even their terminology is wrong. The issue isn't 'quantity surcharges'; it's fast-mover discounts."

That's the crux of it: 6-ounce cans of tuna are high-velocity products, which are nearly always sold on a promotional basis in many markets. Big cans are neither.

Moreover, most supermarkets display per-unit prices right on the gondola, so it would be an ill-informed shopper indeed who would be fooled into mistaking which package size is least expensive. Maybe some shoppers just want the big can. But get ready. This issue won't fade quickly.