slang
/prīs păk ärkĭ-tĕkchər/
A term that corporate leaders have lately used as a euphemism for inflationary contraction.
This article is part of Shop Talk, a regular article that explores the idioms of the business world: the insider jargon, the newly coined terms, the unfortunate or overused phrases.
For some time now, consumers have noticed that brands have been quietly reducing their bags of chips and selling smaller cans of soda without reducing prices, a phenomenon widely known as shrinkage.
But corporate leaders prefer another, more obscure term: “package pricing architecture.”
Executives at large companies mentioned “package pricing architecture” twice as often during investor events in the first quarter of this year compared to the same period last year, according to a search of transcripts of U.S. securities companies. market share of $10 billion or more in AlphaSense. , a data platform.
Technically, bundling pricing architecture refers to a strategy in which a company adjusts a product’s packaging (“portion control” snack sizes, for example, or stay-fresh features like resealable pouches) to offer give consumers more options. But companies have recently used the phrase almost exclusively euphemistically, to describe shrinking products, priced at or above what they used to sell.
Sometimes companies do this to cover the rising costs of the ingredients that make up their products. But as companies’ costs have moderated, they have boosted profits by reducing prices slowly, if at all.
Policymakers in the United States and abroad have pointed to the phenomenon of smaller packages and larger prices (although they, like most people, call it inflationary contraction).
Sen. Elizabeth Warren of Massachusetts, along with her Democratic colleague, Sen. Bob Casey of Pennsylvania, introduced a bill in February that would crack down on the practice. On Super Bowl Sunday, President Biden mentioned it in a video.
France has begun to force merchants to place signs in front of products whose size has been reduced without a corresponding price cut.
Companies, on the other hand, tend to highlight the benefits of inflationary contraction in their results, but without saying the word. Utz Brands, which makes chips and other snacks, is one of several companies that has increased its profits even as it sells less food in volume.
As Utz CFO Ajay Kataria said in a May 2 earnings call: “Prices increased by 40 basis points due to certain adjustments in the pricing package architecture to be better positioned in the market.”
In some cases the term is not so sinister. Clorox, for example, reported that it made its Pine-Sol cleaning solution bottles smaller but more concentrated, allowing customers to get the same number of uses with less plastic.
“As we applied the principles of bundling pricing architecture, we realized we could deliver a better consumer experience through compaction,” Clorox CEO Linda Rendle told analysts on a conference call. on results in February.
Still, many companies have been using the term to describe how they offer customers less for more. James Quincey, Coca-Cola’s chief executive, told analysts on a Feb. 13 earnings call that inflation “is putting pressure on certain segments of consumers who are looking for value.”
Your solution? “To keep consumers in our franchise,” Quincey said, “we are leveraging our revenue growth management capabilities to adapt our offerings and pricing package architecture to meet changing consumer needs.”
In simple terms: Customers will likely pay more per sip for soda.