SHRINKFLATION is causing major issues for shoppers; what exactly is it and how does it affect you?
Pippa Malmgren, a British economist, is credited with coining the phrase.
What is shrinkflation?
According to Investopedia, shrinkflation occurs when a product’s size or quality is reduced while the price remains the same.
Increasing the price per unit of measure is a tried-and-true strategy used by businesses, primarily in the food and beverage industries, to boost profit margins or maintain them during periods of rising input costs.
In business and academic research, it’s referred to as package downsizing.
It can also refer to a situation in which the economy is contracting while costs are rising.
Shrinkflation companies often offer a smaller package for the same price as a larger one.
They’ve even been known to alter the product’s quality.
Customers may become dissatisfied with a product or brand if they see that they are getting less for the same price due to shrinkflation.
The term shrinkflation combines two words: shrink and inflation.
According to Investopedia, the “shrink” part of shrinkflation refers to a change in product size, whereas the “-flation” part refers to inflation, or a rise in price level.
What causes shrinkflation?
When production costs begin to rise, businesses frequently engage in shrinkflation.
When the cost of key materials or labor increases, so does the cost of producing goods.
Profit margins could suffer as a result, and the company may be forced to shrink its products rather than raise the sticker price.
A redesign on the packaging or a new slogan is one of the most effective ways to detect shrinkflation.
This could indicate that the company has changed something, even if it’s just the product’s size.
Companies that make candy bars, for example, will be affected by cocoa prices.
Instead of raising the price of their product, the company may decide to reduce its size in order to remain competitive.
According to powderbulksolids.com, Mars Inc followed this path in 2017, reducing the range of Maltesers, M&Ms, and Minstrels in the UK by 15%.