Why shrinkflation isn’t the crime it’s often made out to be

I’ve just had a call from a reporter asking for comment on the heinous crime of‘shrinkflation’. This happens at least once a year. Whenever someone notices aCreme Egg got smaller or a box has less powder in it, the hares go racing on aconsumer deception they’d love to be the first to expose.

Imagine their disappointment when, year after year, I explain reducing packsize or weight is a perfectly legitimate marketing lever that is often verymuch in the interest of the consumer. As always, the risk of the move is withthe supplier, who needs to study the effect on sales of either putting up theprice and appearing to be worse value, versus reducing the size without movingthe price and… appearing to be worse value.

Despite the costs involved in changing the product, the latter often wins. Inmany cases, the consumer would be happier to get slightly less of theirfavoured product than pay a bit more. This is especially the case when a roundpound price point is in danger of being exceeded.

If ever there was a time when shrinkflation was most valid, it’s right now.With affordability at a historical low, suppliers are noticing how easy it isto choke off sales with a price rise. This effect is very obvious in treatcategories, which is why confectionery is often seen as the main perpetrator ofthe shrink. But it also affects staples and commodities, with consumersstretching out the use of a box of soap powder or a tub of butter, for example.

Downsizing a pack does earn the criticism of ‘consumer deception’ versus themore standard form of price inflation. But this is unfair in my view. Whatexactly is the supplier supposed to do here? The pack is marked with weight andif the new weight is communicated in the same way as the old weight, then it’snot deception.

In raising the price, a supplier would not be expected to shout “now availableat a new higher price!” so nor should it be expected to mark the pack “Warning,this is 7% smaller!”. In both cases, the consumer may or may not notice beforethe purchase. If their experience of the product is good, they’ll buy it again.If not, they won’t, and that’s the exact calculation the supplier is trying tounderstand in the first place.

So no, reporters, I don’t have a problem with shrinkflation or ‘deception’ whenprice elasticity is fully understood and drives the decision. I do, however,dislike it when suppliers opt for pack downsizes to avoid retailer reaction to,or subsequent implementation delay of, a price increase. This is just areflection of their inability to handle a cost price increase with theretailers.

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