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

Date: April 19, 2022
Author: David Sables - CEO
Source - The Grocer

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 a Creme Egg got smaller or a box has less powder in it, the hares go racing on a consumer deception they’d love to be the first to expose.

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

Despite the costs involved in changing the product, the latter often wins. In many cases, the consumer would be happier to get slightly less of their favoured product than pay a bit more. This is especially the case when a round pound 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 is to choke off sales with a price rise. This effect is very obvious in treat categories, which is why confectionery is often seen as the main perpetrator of the shrink. But it also affects staples and commodities, with consumers stretching 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 the more standard form of price inflation. But this is unfair in my view. What exactly is the supplier supposed to do here? The pack is marked with weight and if the new weight is communicated in the same way as the old weight, then it’s not deception.

In raising the price, a supplier would not be expected to shout “now available at 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 before the 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 to understand in the first place.

So no, reporters, I don’t have a problem with shrinkflation or ‘deception’ when price 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 a reflection of their inability to handle a cost price increase with the retailers.