Cereal prices rise, boxes shrink.(up front: News / Trends / Advice)(Kellogg)

Inflation means your dollar is shrinking, but it can mean your cereal box is shrinking, too. Kellogg announced in July that it would impose a price increase averaging 2 percent overall on some cereals this fall, including Corn Flakes and All-Bran. It also said that it would trim the box sizes of Frosted Flakes, Frosted Mini-Wheats, and Rice Krispies 5.3 to 15 percent yet charge the same price (see "Fewer flakes," below). "It's a way to raise prices to make it look like it's not as large an increase as it really is," notes Ephraim Leibtag, an agricultural economist at the U.S. Department of Agriculture's Economic Research Service.

Kellogg attributed the hike to the higher cost of commodities, particularly grains, sugar, and energy used in manufacturing and transportation. But marketing expenses can be high as well. (Perhaps it's no surprise that Kellogg also announced it would be spending more for "brand building.") Raw materials, experts say, account for only 10 to 40 percent of the retail price of a box of cereal.

General Mills and Kraft Foods declined to discuss pricing plans for their cereals, but industry watchers say that consumers probably won't be seeing the last of the incredible shrinking cereal box. They note that the growing influence of private-label products and the power of super-retailers such as Wal-Mart have protected consumers from higher prices until ...