BAVIS_1170x120_10-22-20

‘Shrinkflation’ affects manufacturers, retailers and consumers

Print Friendly, PDF & Email

As retail costs balloon, certain products deflate.

Across retail categories, more manufacturers are making products smaller to offset rising costs, a practice called shrinkflation, or downsizing.

Retail costs keep climbing, as U.S. inflation hit its highest one-year price hike in more than 40 years in March 2022. Global supply chain disruption has made raw materials, labor and freight more expensive. Costly omnichannel investments, product returns and sustainability efforts also add financial pressure.

That’s why consumer packaged goods suppliers are now scrambling to cut back somewhere. Shrinkflation helps brands save some money — and keep prices stable — by slightly reducing the amount or weight of their goods.

Let’s examine what shrinkflation looks like and how it affects brands, retailers and consumers.

Household staples shrink

Recently, several popular CPG brands exhibited signs of shrinkflation across the food and beverage, personal care and pharmacy categories:

• Doritos bags fell in weight from 9.75 ounces to 9.25, equivalent to five fewer chips, and parent Frito-Lay cited inflation.

• Aleve pain relief pills have decreased from 100 caplets per bottle to 90.

• Cottonelle toilet paper mega rolls shrank from 340 one-ply sheets per roll to 312.

• Gatorade bottles decreased in size from 32 fluid ounces to 28. The brand called the new packaging more aerodynamic and easier to grab.

• Pantene changed its conditioner packaging format from a bottle to a tube while shedding 1.6 fluid ounces.

Brands defend shrinkflation

Shrinkflation has increased public scrutiny of CPG brands, including real-time observations on Reddit. In response, most CPG brands defend their use of shrinkflation as a business necessity to adapt to soaring inflation. They emphasize that shrinkflation is far more palatable than resorting to price hikes to keep product sizes stable.

Additional reasons brands cite for shrinkflation relate to social good, including environmental friendliness, offering consumers more variety, and improving product quality. For instance, General Mills’ spokesperson said shrinkflation helps the brand fit more products into trucks, leading to fewer trucks and reducing fuel emissions.

Retailers respond to market shifts

Retailers have responded to broader market factors by reducing their own expenses, ordering less merchandise and adding new fees. Yet retailers may not be able to avoid shrinkflation. The practice is legal as long as the product is clearly and accurately labeled. For transparency, most grocery stores are required to list the unit price to inform consumers how much weight they are getting for their money.

To catch shrinkflation, retailers can proactively ask suppliers to inform them of their shrinkflation strategies. Retailers can also confront suppliers that reduce product sizing while simultaneously increasing prices, which boosts the risk of customer dissatisfaction. Retailers must anticipate customer pushback regarding shrinkflation, and weigh its effect on their assortment and pricing strategies.

Notably, shrinkflation gives retailers a timely opportunity to fuel private label growth by adding more store brands to their assortments. Positioning private labels as quality, affordable alternatives can drive retailers’ sales during this inflationary period by offering better value for money.

Consumers show frustration, resilience

Rising inflation has made more consumers price conscious, as their money no longer stretches as far. Everyday essentials like gas, grocery and pharmacy goods now cost more. Add in shrinkflation and consumers are understandably frustrated to pay the same as before for less product. Shrinkflation is an even bigger concern for lower-income shoppers and retirees who have fixed budgets.

Yet most consumers reasonably yet reluctantly accept shrinkflation as the cost of doing business. More shoppers are shifting their habits by buying less or choosing more value-tier (versus mid-range or premium) goods and private labels.

Consumers increasingly pay attention to a product’s unit price, rather than its retail price, to know how much weight of a product they get for the price. They also forgo prepackaged goods by buying foods in bulk.

Shrinking goods without
eroding goodwill

Overall, shrinkflation has allowed CPG suppliers to keep prices stable despite today’s challenging economic reality. Yet many consumers resent retail’s great disappearing act. Now retailers and brands must prepare for consumers’ new pragmatic shopping habits, as both products and their wallets feel lighter amid rising inflation.

Lisa Goller is a senior retail writer for RangeMe. She is a marketing and communications professional with over 20 years of experience serving retail, consumer goods, B2B and technology companies.


BEIRES_728x90

FREUD_728x90_6-19-20

You must be logged in to post a comment Login