Nobody Decided to Make the Food Worse
A savings target is committed before anyone has named where it will come from. Every taste test that follows is run against last year's recipe, never the original.
You know the meeting. Next year's plan comes down, and inside it is a cost-savings number the business has already committed to. Nobody in the room can yet tell you which costs it will come out of. That is the next six months of work, handed to people who will be measured on finding it.
The person in the chair is a brand general manager, or the R&D lead sitting beside them. They have a contribution line to hit and four levers to hit it with, and three of those levers are defended by someone. This piece is about the one that is not.
Three levers have defenders. One doesn't.
Price is the most visible lever, so it is the most constrained. Key price points are thresholds retailers and shoppers both defend, and a private label sits one shelf over, waiting. Trade spend — the money paid to retailers for shelf space, displays and deals — cannot be cut without risking the distribution the whole business stands on. A&P, the marketing budget, can be cut and regularly is; it is the standard in-year rescue for a contribution target.
And COGS can be worked quietly, inside the product, where no line on the package announces that anything changed.
Pressure in a system flows to the levers with no defender. Marketing is one. The recipe is the other.
The share of salt researchers removed from three meat products using just-noticeable-difference methodology, with consumers unable to tell the reformulated product from the original. That is the size of one undetectable step.
The savings number comes before the savings
Large food and household companies build a productivity target into the plan before anyone has named where it will come from. The number is committed first. Teams go and find it.
This is not an inference about how companies behave in private. It is disclosed to shareholders.
Procter & Gamble
FY2012–FY2021In investor materials filed with the SEC in September 2017, P&G described delivering a $10 billion productivity program across fiscal 2012 to 2016, then committing to a second program of up to $10 billion for fiscal 2017 to 2021. One slide puts a figure on where the first one came from: $8.7 billion in cost of goods savings, FY2012 to FY2017.
A commitment of that size is made in advance of knowing which specific costs will be removed — and it is announced, measured and reported, not hidden.
Some of what gets found is genuinely free. Automation, less waste, smarter logistics, procurement scale — nobody's dinner gets worse because a factory got more efficient.
The rest is found in the product. The industry's term is value engineering: re-engineering the product to deliver the same apparent value at lower cost. A cheaper oil in place of the premium one. Less of the characterizing ingredient — the cheese, the cocoa, the fruit, the meat — and more of the inexpensive extenders: water, starch, air. A thinner coating. A smaller piece. Or the close cousin shoppers have learned to name: a slightly smaller pack at the same price, shrinkflation, which is a price increase wearing a COGS costume.
Each change, on its own, is small. That is not a flaw in the process. It is the process.
Every test is run against last year's recipe
Value-engineered changes are validated by consumer testing, and the standard is a parity test: the new version must be not significantly worse than the current product.
Read that benchmark again. The current product. Not the original. Not the recipe that built the brand.
| Step | Compared with | Result |
|---|---|---|
| Reformulation 1 | The 2019 recipe | Passes |
| Reformulation 2 | Reformulation 1 | Passes |
| Reformulation 3 | Reformulation 2 | Passes |
| Reformulation 4 | Reformulation 3 | Passes |
| Reformulation 5 | Reformulation 4 | Passes |
| The product people remember | Never compared | No test exists |
Five steps of the size measured above leave roughly 29–36% of the original ingredient. The step size is measured; the chain is arithmetic. Nobody has published a measured multi-step chain, which is the point.
No individual step fails a test, no individual manager approves "worse," and every decision is locally rational: hold the price point, hit the savings target, pass the test.
Two things make the ratchet turn further than instinct suggests.
The step is large. A fifth of the salt, gone, undetected, in one move. And the method is not a trade secret — the paper's own introduction states the general case plainly: threshold methods are "typically used in ingredient replacement for cost savings, regulatory requirements, or product modification, where the change must not be evident to the consumer." A 2012 paper in the Journal of Sensory Studies is titled "Determining Sequential Difference Thresholds for Sodium Reduction." Sequential. The procedure for repeating it has a name and a citation trail.
The test is built to pass. A parity test returning "no significant difference" has not shown the two products are the same. It failed to show they are different, which is a different statement. A small panel, a noisy attribute or an underpowered design will return that result routinely when a real difference is sitting there. The weaker the test, the easier it clears — and nobody in the chain is rewarded for running one strong enough to fail.
The saving lands this year. The erosion lands on someone else's watch.
A COGS saving lands immediately, in full, in this year's contribution, credited precisely to the team that delivered it. The cost of a slightly worse product lands slowly, over years, in the base business — a household here and there buying less often, then not at all, attributed to the category, to competition, to anything diffuse. Brand managers rotate every couple of years. The saving is booked on one watch; the erosion is discovered on another.
Any system produces more of what it credits promptly and less of what it debits vaguely. This one is no different. And when the base softens, the standard responses make it worse: more trade promotion to hold volume, which squeezes margin further; a marketing cut to rescue contribution; and next year's productivity target, still in the plan, waiting to be found somewhere.
The product ends up funding its own decline.
- A standing productivity target set as a number before its sources are named.
- A defended price point that removes price as a lever before the year starts.
- Parity testing against the current spec rather than against a held reference.
- Brand manager tenure shorter than the erosion — roughly two years against a decade.
- Not yours if the reformulation is driven by input inflation, an allergen, or a sodium or sugar target. Those explain individual changes. They do not explain a one-directional drift.
- CEO The productivity program is real money and it is reported to shareholders; $8.7bn over six years at one company is not a line you abandon. The brand equity it consumes is never charged against it. Keep the program, require it to name which savings touch the product.
- CFO Every COGS saving is booked with precision in the year it lands. The offsetting loss has no account, no owner and no date. Give quality erosion a line, even an estimated one, so the trade appears somewhere.
- CRO A 20% cut nobody detects at the panel is still a cut the twentieth repeat purchase detects. Revenue sees it as category softness. Track repeat rate by formulation version, not by quarter.
- CPO The benchmark is the defect. Testing against the current spec guarantees the distance from the original is never measured. Freeze a gold-standard reference and test every reformulation against it as well.
- Legal Nothing here is misrepresentation — the pack changes when the formula does. Shrinkflation is where that stops being true in some markets. Keep pack-size changes disclosed ahead of local rules, not in step with them.
- Risk The exposure is a single-direction process with no stopping condition and no one accountable for the cumulative position. Set a floor on the characterizing ingredient that the savings target cannot cross.
Reconciled. The CFO and the CPO want opposite things in the short run — one needs the saving booked this year, the other needs a reference that makes some savings unavailable. Legal and the CEO are close to indifferent. The course that satisfies four of the six is the frozen benchmark: it costs nothing this year, it leaves the productivity program intact, and it converts an invisible cumulative drift into a number somebody has to sign.
Freeze one gold-standard batch and make it the second benchmark on every reformulation test.
Pick the formulation the brand was built on, or the oldest spec you can still manufacture. Produce it, hold it under controlled storage, and require every parity test to report two results: against the current product, and against the reference. The first result still governs the go decision. The second accumulates.
You are not blocking any saving. You are making the cumulative position visible to the person who signs for it, which is the only thing currently missing.
- What it costs
- One production run, controlled storage, and a second arm on each sensory test — a few thousand dollars a year against a target measured in millions. The real cost is that some savings stop being approvable.
- How you'll know
- Within four test cycles you will have a number for distance-from-original that did not exist before. If it is flat, the ratchet is not operating in your category and you can stop.
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