BEIJING—Companies in China are responding to rising costs with an old strategy: smaller packaging.
Sellers of milk, Coke, Pepsi, L’Oréal facial moisturizer and an array of other products have rolled out smaller sizes while keeping prices steady, a time-honored tactic of subtly passing along increased costs to consumers.
The move also could deflect criticism from Beijing, which has been pressuring companies not to fuel inflation.
“Size reductions in China are a way for companies to absorb cost increases without gaining too much attention,” said Torsten Stocker, a Hong Kong analyst for Cambridge, Mass., consulting firm Monitor Group. The changes are “at the level that doesn’t get noticed much by consumers.”
Rising food prices have become a critical issue for the Chinese government, which is concerned that inflation could undermine economic growth and stability. China has imposed price controls for a range of foods and has leaned on companies directly not to charge more. Broad consumer prices rose 5.3% in April from a year earlier, exceeding the government’s 4% target, driven by an 11.5% jump in food prices.
National Development and Reform Commission in China, which regulates prices, has demanded that foreign and domestic consumer-goods companies disclose their production costs and operating margins, according to an executive familiar with the situation. Commission officials indicated that operating margins should be limited and dismissed arguments that the government should take into consideration such factors as marketing costs, the executive said.
The commission didn’t respond to a request for comment.
The government this month fined Anglo-Dutch consumer-goods company Unilever around $300,000 for telegraphing increased prices in the media, which the government said led to hoarding. Unilever said it accepted the decision and that it abides by Chinese law.
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