Shrinkflation is a process of increasing product prices differently.
This word has its origin in two words, shrinking and inflation, which means inflation through shrinking product sizes.
In this practice, product companies do not increase or decrease product prices. Instead, the product quantity given at the same price is altered. This is a common strategy used by brands to manipulate consumers.
A price change in the product can lead to losing customers due to the wide range of product alternatives and brands present in the market. Thus, as the price remains the same, you may not notice a slight difference in the product quantity.
This is a different kind of inflation which may sound complicated but is not, once you understand the logic behind it. By reducing the size of the product slightly, you pay the exact amount you previously used to pay but for less quantity. This increases the cost per unit mass of the product.
If earlier you paid Rs 10 for 200 grams of any product, and the company decides to shrink their product sizes by 50 grams, you have to pay the same amount for 25% less quantity of the product.
Let’s look at various reasons and examples of shrinkflation.
Table of Contents
Shrinkflation in Grocery Stores: Reasons You Need to Know
Economic Factors
Economic instability also leads to the practice of shrinkflation. When the Indian economy is unstable due to various social and global economic factors, brands do not make sudden increases in product prices.
Suddenly increased prices can create panic and tension within the economy. Thus, shrinkflation is the perfect solution for businesses. Keeping the product price the same deals with consumer psychology.
As consumers tend to look at the product price rather than the quantity. This method is the perfect solution to be implemented for enhancing cash flow and profitability.
Competitive Market
Due to rising competition for different products in the Indian markets, companies are forced to adopt different measures to maintain their market share.
This often leads to extra expenses on marketing and promotions of the product on different platforms including social media. This cost of overspending on marketing is recovered through shrinkflation.
Production Costs
Through shrinkflation, companies tend to reduce their production costs. As the product size is reduced, less content is given for the same price. This not only saves the content in the packaging but also saves the packaging material.
This results in saving large amounts of capital for other operations in the company. This also helps the manufacturers to adjust the cost of raw materials and labour. this leads to higher profits and increased profitability for the company.
Shrinkflation is one of the safest methods for companies to enhance profits without losing existing customers.
Have you noticed shrinkflation in the grocery store?
Shrinkflation in Packet Items
Packed items such as potato chips, breakfast cereals, snacks and chocolate bars undergo shrinkflation to adjust for rising transportation costs, production costs and other factors.
These packets are frequently downsized and reduced in quantity as the price remains the same. Reduction in the size of these highly sold products is a common example of the practice of shrinkflation.
Shrinkflation in Beverage Bottles
Beverages such as different types of soda cans, juice bottles or alcoholic beverages are also affected by shrinkflation. Their bottle size and volume are slightly reduced while the selling price remains unaffected.
Dairy items such as milk, yoghurts and others are also affected by shrinkflation causing a reduction in their sizes and quantities.
Daily Use Items
Household items such as washing liquids, toilet paper, and consumable items such as ice creams, frozen foods and bakery items also undergo shrinkflation. This leads to buying more quantity of daily household items and in turn, increases living expenses.
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How to tackle shrinkflation and save your money?
Read Product Labels
While buying products, you should not only pay attention to the selling price of the product you wish to buy. But, you should majorly pay attention to the label and unit cost. Unit cost is the cost that you pay per gram or per unit of your product. This is an important factor in determining the extent of shrinkflation.
Switch to another brand
If you notice your preferred brand in a specific product category practicing shrinkflation to a large extent, you should consider alternatives. Indian markets have different options and brands available for a particular product which you can switch to avoid shrinkflation. Different brands offer you different options and you can choose products as per your preference of price.
Look for Offers and Promotional Discounts
As this practice is fairly common in India, you should look out for promotional offers and discounts in buying daily-use items. Buying discounted items is a great way of accounting for the extra expenses due to shrinkflation.
Raising Concerns
If you encounter frequent reductions in product sizes, you should reach out to the manufacturers and explain the effect of rising prices on your daily life. You can also reach out to companies through their social media handles or mainly their Twitter (X) accounts.
Conclusion
Shrinkflation is a fairly common, yet new concept for Indian consumers. It does save the company’s resources and costs of production, marketing and transportation. However, it causes difficulties for consumers in budgeting monthly expenses.
Noticing shrinkflation may also cause you to lose trust in a particular brand and this practice offers a reduced value of money for your money. Wish to learn more about money management? Read about How can you build a strong financial future with simple habits?
However, upon noticing this phenomenon you can deal with it by measures discussed above which include reading product labels and finding out the cost per unit of product or switching to a different brand.
Frequently Asked Questions (FAQs)
Indian companies are required to provide unit prices of items in per-gram terms. If you still have difficulty finding this, simply divide the buying cost by the quantity of the product.
For example, if you buy 200 grams of Paneer for Rs 150, the price becomes 0.75 Rs per gram, and so on.
You can raise your concerns to companies about extreme shrinkflation practices by using social media platforms like Twitter (X), Facebook, or LinkedIn. Posting your concerns publicly on these platforms can draw attention to the issue and prompt a response from the company.
Additionally, you can contact the company directly through their customer service channels or feedback forms on their official websites. Engaging in discussions on consumer forums and review sites can also help highlight the issue and influence company practices.
Consumers can detect shrinkflation by paying close attention to product labels and packaging. Checking the unit cost, which is the price per gram or unit, can reveal whether the quantity has been reduced.
Comparing the current product size with previous purchases or similar products can also help identify shrinkflation. Noticing changes in packaging design, which might conceal a reduction in quantity, is another way to detect this practice. By being vigilant about these changes, consumers can better understand and respond to shrinkflation.
Shrinkflation commonly affects packed foods, beverages, dairy products, and household items. Products like potato chips, breakfast cereals, snacks, and chocolate bars often undergo shrinkflation to offset rising costs.
Beverages such as soda cans, juice bottles, and alcoholic drinks also see reductions in size while prices stay the same. Dairy items like milk and yogurt, along with household products like washing liquids and toilet paper, frequently experience shrinkflation, leading to consumers paying the same for less quantity.
Shrinkflation poses several risks to consumers and businesses:
Consumer Deception: Consumers may feel deceived when they realize they are paying the same price for less product, leading to a loss of trust in the brand.
Budgeting Challenges: Households may find it harder to budget for groceries and daily essentials as they need to buy more frequently to maintain the same supply.
Brand Loyalty: Consumers might switch to competing brands if they feel they are getting better value elsewhere, potentially harming the original brand’s market share.
Economic Impact: Widespread shrinkflation can contribute to perceived inflation, impacting consumer confidence and spending behavior.
Companies use shrinkflation for several reasons. Firstly, it allows them to manage rising production and transportation costs without directly increasing prices, which can lead to a loss of customers. In a competitive market, sudden price increases might drive customers to alternative brands.
Secondly, by reducing the quantity of the product, companies save on raw materials and packaging, enhancing profitability. This strategy also helps companies maintain their market share and cash flow during economic instability.
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