Shrinkflation Fuelled By Rising Costs

High inflation fuelled by pandemic supply-chain challenges and rising labour costs, and now the war in Ukraine, mean that grocery prices are rising and rising. Never mind if you call it a crisis or not, it is hitting hard at the checkout.

In the US the consumer price gains accelerated in February to a fresh 40-year high. With rising petrol, food and housing costs, inflation is poised to rise even further following Russia’s invasion of Ukraine.

So what can consumers expect here? 

Retail industry experts predict “shrinkflation” as more consumer products start shrinking in size or quantity, or both, because of rising costs, from logistics to labour.

However, navigating product changes and pricing may be a bit different in 2022. Grocery has been in the headlines with the Commission investigation and final report on front pages and television news, and consumers will have an opinion and be more aware.

With inflation and household cost of living rising, consumers are paying more for everyday purchases, as companies pass on higher production costs.  

Brands can raise prices, and many are. Others are charging consumers the same price while offering less, in effect product downsizing.

Product downsizing, or "shrinkflation," happens during times of high inflation because brands are also paying more for raw materials, production and distribution.

So we’ve all experienced slimmed-down toilet rolls, fewer biscuits in the packet, sleight of hand packaging that promises more than it delivers. These have all been called out by consumers, but brands trying to inconspicuously shrink the size of their packs in 2022 can expect a real consumer backlash.

This "shrinkflation" phenomenon is nothing new and the practice is typically triggered when inflation surges and companies' costs go up.

So here’s the challenge, what is an innovative way to reduce costs and still deliver on brand promise?

The cost element to innovation usually means adjusting the count per pack or the package size as one way of reinvesting in innovation while maintaining a competitive price point. 

But, and there is a but – consumers are better informed than they have ever been, social media is the devil’s court, so brands need to have a plan in place and a narrative that they can defend.

Product adjustments will continue to happen, but with it comes consumer scrutiny, so it’s the story that goes with the brand that needs real attention.