7gen Bloc

It's a hoary old adage, but it happens to be true: "those who live in glass houses shouldn't throw stones."

In my recent post, "Less for You and More for Them," I took other packaged-goods companies to task for product downsizing, the practice of selling less content per package while charging the same (or higher) price. The subject is fair game for discussion, but I was wrong to "throw stones" at other companies for downsizing when we have occasionally done so ourselves (which I acknowledged inadequately and incompletely in the earlier post).

I made a second mistake in that post: I grossly over-simplified a very complex set of issues.

Downsizing most certainly is not a simple equation where reduced size = increased profit. And it's not always bad. Yes, it's absolutely wrong to sell less, charge more, and not inform consumers. But sometimes, cutting the content allows a company to deliver product enhancements without increasing the price.

And yet, downsizing often results in the upsizing of packaging waste. When you reduce the count in a baby-wipes tub from 80 to 70 and use the same package, you obviously increase the waste per wipe. An exception is flexible packaging—the stuff that's used on diaper and most paper products. When the count goes down the packaging is reduced and as a result, the waste is reduced as well. As I said, downsizing gets complicated.

Downsizing is one among many gears that companies use as they navigate through a dauntingly competitive landscape in these tough economic times. For Seventh Generation, product pricing and sizing decisions are largely shaped by external costs and the needs of our manufacturing and retailing partners. Let me take a moment to explain.

Issue #1: Costs are never constant.
The cost of raw materials, transportation, wages, insurance, and the rest are always in flux. Most often, the reasons for the changes are beyond our control. Nevertheless, to some extent we can influence costs by striking the best balance between the 3Ps: performance, price, and the packaging of our products. In the past, we've improved the performance, kept the same price, and lowered the counts of diapers and bath tissue, so as to cover the higher costs of raw materials and improvements to machinery. We take these decisions very seriously.

Issue #2: We don't own our manufacturing facilities.
We contract with outside manufacturers who make our products. This is not always easy, as our unique raw materials and product specs are usually very different from the conventional products they manufacture. Sometimes, we are asked to conform to product sizes and counts that run efficiently on their machinery. If we don't agree (and sometimes, we don't), we face higher prices. We must constantly manage what we want to provide with what our manufacturing partners can produce.

Issue #3: Our price point is not always the retailer's price point.
By the time you buy one of our products, it has exchanged ownership one or more times. The final price reflects many decisions that are outside of our control. Retailers may ask a manufacturer to downsize a product if cost increases for the current size would force them to break a widely accepted price point. While we influence these decisions, they are not ours alone to make.

So how do these issues play out in a pricing/sizing decision? I'll use Seventh Generation diapers as an example.

Last year, raw material and other costs were increasing rapidly due to the run up in the cost of oil. That led to an industry-wide price increase on diapers this past February.

At the time, Seventh Generation and our manufacturing partner were working to enhance our diaper line by improving the taping system. Rather than take a price increase at the same time as other brands, we reduced our counts to make them equal to Huggies Supreme and Pampers Cruisers jumbo sizes. On a per-package basis to new consumers, we became more competitive. Current users got a better product at a higher cost per diaper. Ultimately, the cost increases we needed to pass on were included in the downsizing.

In your comments to my earlier post, some of you argued that not many people buy our products based on the price alone. For that, I am truly grateful. We recognize that when you opt for environmentally safe products over conventional offerings, there's a financial implication, and we thank you for your continued support.

Nevertheless, consumers sometimes complain that our products are too expensive. We do our best to offset our price tag with online coupons. And we are committed to finding other ways to our make our products more accessible to more people—especially at a time when all of our wallets are getting squeezed.

It's a constant balancing act to put forth authentic products made from superior ingredients in competitive sizes at price points that consumers can afford. As we move forward, I promise you that we will work hard to avoid downsizing whenever possible.
photo: Matt Buck