Food inflation is here!

Chips are disappearing from bags, candy from boxes and vegetables from cans, the New York Times warned this week. With rising costs of production and an economy that continues to lag, food inflation has arrived.

It’s not just the increase in costs for food baskets, and it’s not just Michelle Obama’s push to skinny-size America. The great American recession has hit food producers as hard as it’s hit the rest of us:

It’s called “chiseling,” and this time it doesn’t refer to your washboard abs — at least not directly. Chiseling is the practice of selling marginally smaller packages for about the same price.

If market demand doesn’t cover increased production costs for that same 6-ounce can of tuna, the manufacturer has to sell a 5-oz can. Chiseling is smart business. The alternative is to keep failing to cover costs for those same 6 ounces, and eventually go out of business.

Chiseling isn’t just smart business; the policy aligns perfectly with government priorities. First Lady Michelle Obama wants a national size-awareness campaign? Great; smaller packages mean fewer calories. Green initiatives pushing for less packaging? Fantastic; smaller boxes use less cardboard.

For consumers, food is about feeding ourselves and our families. Food producers see the market differently. Green interests, the diet industry, subsidies for sugar and wheat — these are all major hurdles manufacturers have to balance, or else face going out of business.

The US pays about $20 billion a year to farmers in direct farm subsidies. Our $60 billion/year diet industry grows about 6% annually.

With so many mixed market cues it’s a wonder the food industry hasn’t already undergone major restructuring.

The diet industry is business. Non-fat yogurt purveyors want to help dieting folks lose weight, but if everyone were happy with our girths there’d be little market for less-flavorful yogurts.

Same goes for the greenies. Ostensibly their goal is to get us all back to prehistoric emissions levels — but by printing their message in magazines and airing “green” TV ads they contribute to just the emissions build-up they caution against.

Get-fit incentives should counsel consumers to breeze right past the diet industry’s push towards unsustainable calorie counts into the healthy territory of moderation. Instead we’re seeing growth at the extreme ends of the spectrum. A nearly- $60 billion/year diet industry grows over 6% annually, while the super-sized fast food industry tops $170 billion. Just today Denny’s introduced their new maple bacon sundae for their all-bacon, all-the-time festival, “Baconalia.”

Americans are the fattest people in the world. Food production in this country is among the most artificially inflated in the world.

Smaller package sizes are frustrating for hungry folks, but small steps towards portion size deflation beats market collapse and another supersize bailout any day.

Chiseling is the first step towards more reasonable growth in America.



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