The Triple Bottom Line Blog

Shortly after we wrote this post commending Wal-Mart for moving to all-compact detergents in its stores, our friend Dennis Salazar alerted us to a story he'd recently written about the same phenomenon. After shopping for detergent and buying the new compact bottle, Dennis's take on the change wasn't quite so positive:

The [old] 200-ounce bottle, which sells for $9.99, promised it was good for 64 loads. The new 100-ounce bottle, the one that was double strength so only half the usual amount was now needed, also sells for $9.99--but promised only 52 loads.

The bottom line for my sustainable purchase? A load of laundry which used to cost my family 13.2 cents in detergent now, thanks to the new sustainable design, will cost 15.6 cents per load. That, my co-consumer friends, amounts to a price increase of 18.2 percent--a splendid windfall for the manufacturer by any standard.

Of course, these calculations do not even take into account that we are all creatures of habit. No doubt, the manufacturer realized and even projected that most of their customers would use more than the recommended "half" of their more expensive product, despite the new concentrated formulation and labeling. Hmmm . . . sell the consumer more product at a substantially higher profit margin? You've got to love this sustainability. And incidentally, the big-box store where I shop, the one that took credit publicly for driving the package design change, isn't complaining about the windfall, probably because they are participating in it.

We asked Dennis whether this apparent windfall applied to just one one detergent brand or had affected many brands. He told us that, without doing an exhaustive survey, he noticed that several detergents seemed to exhibit the same kind of unannounced price increase (most smaller than the one he wrote about).

Dennis also told us he'd written his article with two lessons in mind:

1. For the businessman--to help dispel the misconception that green always costs more. The fact is that going green usually reduces costs and re-sizing is a marvelous opportunity to re-price your product.

2. For the consumer--Don't take everything at face value. Do the homework it takes to determine the best value.

Both are good lessons, of course. But the first lesson makes us a little nervous. If clever business people start regularly using green initiatives as an opportunity to reap windfall profits through "re-pricing," the already significant cynicism many people feel about green propaganda will surely get a lot worse.

One more point. Wal-Mart's own original blog post about the switch to compact detergents drew a number of comments, some of which raised the issue of price. The most substantive of these, by "Sunny," read as follows:

There are two reasons why the cost [of detergent] isn't going to go down, and neither of them really have much to do with the cost of oil.

First, believe it or not, smaller containers are quite a lot more expensive to product than the bigger ones, because the ratio of empty space per unit of plastic is much lower in a smaller bottle. In other words, it doesn't take four times as much plastic to make a one-gallon bottle as it does to make a one-quart bottle. The cost difference isn't as drastic with cardboard cartons, but it exists--and small boxes aren't cheaper per bottle inside than big boxes.

Second, the only thing being taken out of the formulation is water--for which the manufacturers' cost is negligible. It's the surfactants and cleaners and other things that make up the cost--so eliminating the water doesn't change the price enough to be able to mark it down.

So . . . it will take less packaging (but not as a direct ratio to the smaller package size)--and less cardboard--less space on the shelf--less effort to stock the shelves (and carry it home!)--and will allow the manufacturers to load more in a single truck--and the empties will be easier to recycle or will take less space in a landfill.

So--the tangible benefits are many, but the cost savings directly to the consumer really won't change that much.

Realistically, we all know that prices tend to rise, and it's no great shock when the unit cost of an item creeps upward at the same time that a new package, new product formula, or other change is introduced.

But we hope manufacturers and retailers who are trying to earn "green cred" will be very careful about how they handle those increases. The last thing they want to do is besmirch the concept of sustainability and inspire a consumer backlash against it.

Labels: compact detergents, Dennis Salazar, Packaging, Wal-Mart