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The ‘hidden’ form of inflation

Shrinkflation consists of reducing a product’s size while maintaining its retail price. It affects food, drink, and some household products, and is a way for producers and manufacturers to retain customers through sustaining price points amidst increasing costs of production. Supply chain bottlenecks, labour shortages, increased post-pandemic demand and Russia’s invasion of Ukraine have increased shrinkflation activity to unprecedented levels.

Andrex toilet paper has reduced by 21 sheets per roll, Jaffa Cakes in a box have decreased from 12 to 10, the weight of a Toblerone has reduced by 25% and Dove’s standard bodywash has downsized from 710ml to 650ml. Most firms may put their hands up and admit the strategy, but the likes of Gatorade have said their 14% reduction in bottle size was part of a redesign to ‘make them more aerodynamic and easier to grab.’ Whilst I don’t doubt the improved aerodynamics and grab functionality, I wonder if it was their primary motivation for this move.

The general mood around the strategy is a negative one, with the term being described as cunning, sneaky, deceptive, and even a ‘curse.’  But what other options do firms have when the cost of ingredients, labour and rent have risen by 10%? One method is to try and absorb these costs with the aim to increase volume. But does this goal of increased volume come from customer awareness that YOU are the company that is not shrinkflating your products? Or increased spending on sales and marketing? I predict the latter.

Is shrinkflation a justifiable method to respond to an increase in costs of production? Perhaps not in its current form. Firms should be making consumers aware of these changes, instead of deceiving them with gradual size reductions without warning nor notification. Done in the right way, could it be an acceptable strategy? Should companies have the right to not be bound to a product size based on the first version of it? If the answer is yes, and transparent shrinkflation is accepted, how could we go about putting that transparency into practice.