What is shrinkflation?
SHRINKFLATION is causing massive problems for shoppers across the world.
Brit economist Pippa Malmgren has been credited for coining the term - but what does it actually mean, and how does it affect you?
What is shrinkflation?
Shrinkflation is when manufacturers shrink the size or quantity of a product while keeping the price the same.
This means that consumers will be paying more per given amount.
Rising the price per given amount is a well-oiled strategy used by companies, mainly the food and beverage industries, to stealthily boost profit margins or to cement them in times of rising input costs.
It is a form of hidden inflation as shrinkflation often goes unnoticed by customers.
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Companies run the risk of turning customers away from a product or brand if they do notice they are getting less for the same price.
Shrinkflation is also referred to as package downsizing in business and academic research.
It's sometimes used to refer to an economic situation where the economy is contracting while also experiencing a rise in costs.
Producers sometimes even make changes to the quality or ingredients of the product, with no decrease in price.
Shrinkflation is a term made up of two separate words: shrink and inflation.
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The "shrink" in shrinkflation relates to the change in product size, while the "-flation" part refers to inflation — the rise in the price level, according to Investopedia.
What causes shrinkflation?
Companies will often engage in shrinkflation when their production costs begin to rise.
When key materials or labor shoot up in price, the cost to manufacture goods rises as well.
This can cause a heavy hit to profit margins and may force the company to simply shrink their products rather than increase the sticker price.
One of the best ways to notice shrinkflation is by spotting a redesign on the packaging or a new slogan.
This may means the company has made a change and that change may just be the size of the product.
The price of cocoa, for example, will impact companies producing candy bars.
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Rather than increase the price of their product, the company may choose to reduce the size to keep competitive with other companies.
Mars Inc took this path in 2017, shrinking its range of Maltesers, M&Ms, and Minstrels in the United Kingdom by 15%, according to powderbulksolids.com.