SHRINKFLATION causes massive problems for buyers – so what is it and how does it affect you?
The British economist Pippa Malmgren is credited with inventing the term.
What is shrinkage inflation?
Shrinkflation is when manufacturers decrease the size or quality of a product while maintaining the sticker price, according to Investopedia.
Increasing the price per given quantity is a well-oiled strategy used by companies, primarily in the food and beverage industry, to covertly increase profit margins or cement them in times of rising input costs.
In business and academic research, it is also referred to as package downsizing.
It is sometimes used to refer to an economic situation in which the economy is shrinking while at the same time costs are rising.
Companies that use shrink tactics often offer a smaller package for the same price.
Sometimes they even make changes to the quality of the product.
Shrinkflation risks turning customers away from a product or brand when they realize they can get less for the same price.
Shrinkflation is a term composed of two separate words: shrinkflation and inflation.
The “shrinkage” in contraction-flation refers to the change in product size, while the “-flation” part refers to inflation — the rise in price levels, according to Investopedia.
What Causes Shrinkage?
Businesses will often shrink when their cost of production begins to rise.
When essential materials or labor explode in price, the cost of producing goods also increases.
This can severely impact profit margins, forcing the company to simply scale down their products rather than increasing the sticker price.
One of the best ways to notice shrinkage is to spot a new design on packaging or a new slogan.
This may mean that the company has made a change and that change may only affect the size of the product.
The price of cocoa, for example, will affect companies that make candy bars.
Instead of increasing the price of its product, the company can choose to reduce the size to remain competitive with other companies.
Mars Inc embarked on this journey in 2017, shrinking its range of Maltesers, M&Ms and Minstrels in the UK by 15%, according to powderbulksolids.com.
https://www.the-sun.com/news/5548247/what-is-shrinkflation/ What is shrinkage inflation? | The US sun