Shrinkflation

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In economics, shrinkflation, also known as the grocery shrink ray, deflation or package downsizing, [1] is the process of items shrinking in size or quantity, or even sometimes reformulating or reducing quality, [2] while their prices remain the same or increase. [3] [4] The word is a portmanteau of the words shrink and inflation. First usage of the term "shrinkflation", has been attributed to both Pippa Malmgren and Brian Domitrovic. [5]

Contents

Shrinkflation allows companies to increase their operating margin and profitability by reducing costs whilst maintaining sales volume, and is often used as an alternative to raising prices in line with inflation. [6] Consumer protection groups are critical of the practice.

Economic definition

Shrinkflation is a rise in the general price level of goods per unit of weight or volume, brought about by a reduction in the weight or size of the item sold.[ citation needed ] The price for one piece of the packaged product remains the same or could even be raised. This sometimes does not affect inflation measures such as the consumer price index or Retail Price Index, i.e. might not increase in the cost of a basket of retail goods and services[ citation needed ], but many indicators of price levels and thus inflation are linked to units of volume or weight of products, so that shrinkflation also affects the statistically represented inflation figures.

Consumer impact

Consumer advocates are critical of shrinkflation because it has the effect of reducing product value by "stealth". [7] The reduction in pack size is sufficiently small as not to be immediately obvious to regular consumers. [8] An unchanged price means that consumers are not alerted to the higher unit price. The practice adversely affects consumers' ability to make informed buying choices. Consumers have been found to be deterred more by rises in prices than by reductions in pack sizes. Suppliers and retailers have been called upon to be upfront with customers. According to Ratula Chakraborty, a professor of business management, they should be legally obliged to notify shoppers when pack sizes have been reduced. [9] Corporate bodies deflect attention from product shrinkage with "less is more" messaging, for example by claiming health benefits of smaller portions or environmental benefits of less packaging. [6]

Examples of shrinkflation

We identified 206 products that shrank in size and 79 that increased in size between September 2015 and June 2017. There was no trend in the frequency of size changes over this period, which included the EU referendum. The majority of products experiencing size changes were food products and in 2016, we estimated that between 1% and 2.1% of food products in our sample shrank in size, while between 0.3% and 0.7% got bigger. We also observed that prices tended not to change when products changed size, consistent with the idea that some products are undergoing "shrinkflation". [10]

The UK's Office for National Statistics [10]

Impact of Shrinkflation on CPIH (UK) 2012 - 2017.png
Impact of Shrinkflation on CPIH in the UK, with the number of food price quotes that saw a change in package size per month

Skimpflation

In October 2021, NPR's Planet Money proposed the term skimpflation to refer to a degradation in the quality of services while keeping the price constant, such as a hotel offering a more meager breakfast or reducing the frequency of housekeeping. [23]

See also

Related Research Articles

Inflation Rise in price level in an economy over time

In economics, inflation refers to a general increase in prices of goods and services in an economy. When the general price level rises, each unit of currency buys fewer goods and services; consequently, inflation corresponds to a reduction in the purchasing power of money. The opposite of inflation is deflation, a sustained decrease in the general price level of goods and services. Prices do not all increase at the same rates. The common measure of inflation is the inflation rate, the annualised percentage change in a general price index. The consumer price index is often used for this purpose; the employment cost index is also used for wages in the United States.

Deflation Decrease in the general price level of goods and services

In economics, deflation is a decrease in the general price level of goods and services. Deflation occurs when the inflation rate falls below 0%. Inflation reduces the value of currency over time, but sudden deflation increases it. This allows more goods and services to be bought than before with the same amount of currency. Deflation is distinct from disinflation, a slow-down in the inflation rate, i.e. when inflation declines to a lower rate but is still positive.

Mars (chocolate bar) Chocolate bar produced by Mars Inc.

Mars, commonly known as Mars bar, is the name of two varieties of chocolate bar produced by Mars, Incorporated. It was first manufactured in 1932 in Slough, England by Forrest Mars, Sr. In its British version the bar consists of caramel and nougat coated with milk chocolate. An American version of the Mars bar was produced which had nougat and toasted almonds covered in milk chocolate; later, caramel was added to the recipe as well. The American version was discontinued in 2002, then revived in a slightly different form the following year under the name "Snickers Almond".

Wine bottle Bottle used for holding wine

A wine bottle is a bottle, generally a glass bottle, that is used for holding wine. Some wines are fermented in the bottle while others are bottled only after fermentation. Recently the bottle has become a standard unit of volume to describe sales in the wine industry, measuring 750 millilitres. Wine bottles are produced, however, in a variety of volumes and shapes.

Drink can Container specifically made for liquid such as beverages and usually made of aluminum

A drink can is a metal container designed to hold a fixed portion of liquid such as carbonated soft drinks, alcoholic drinks, fruit juices, teas, herbal teas, energy drinks, etc. Drink cans are made of aluminum or tin-plated steel. Worldwide production for all drink cans is approximately 370 billion cans per year.

Toblerone Chocolate bar

Toblerone is a Swiss chocolate brand produced in Bern. Toblerone is known for its distinctive shape, a series of joined triangular prisms.

Steel and tin cans Sealed container for storage of foods

A steel can, tin can, tin , steel packaging, or can is a container for the distribution or storage of goods, made of thin metal. Many cans require opening by cutting the "end" open; others have removable covers. They can store a broad variety of contents: food, beverages, oil, chemicals, etc. Steel cans are made of tinplate or of tin-free steel. In some dialects, even aluminium cans are called "tin cans".

Real gross domestic product is a macroeconomic measure of the value of economic output adjusted for price changes. This adjustment transforms the money-value measure, nominal GDP, into an index for quantity of total output. Although GDP is total output, it is primarily useful because it closely approximates the total spending: the sum of consumer spending, investment made by industry, excess of exports over imports, and government spending. Due to inflation, GDP increases and does not actually reflect the true growth in an economy. That is why the GDP must be divided by the inflation rate to get the growth of the real GDP. Different organizations use different types of 'Real GDP' measures, for example, the UNCTAD uses 2005 Constant prices and exchange rates while the FRED uses 2009 constant prices and exchange rates, and recently the World Bank switched from 2005 to 2010 constant prices and exchange rates.

Häagen-Dazs American ice cream brand

Häagen-Dazs is an American ice cream brand, established by Reuben and Rose Mattus in The Bronx, New York, in 1960. Starting with only three flavors: vanilla, chocolate, and coffee, the company opened its first retail store in Brooklyn, New York, on November 15, 1976. The company operates worldwide and also produces ice cream bars, ice cream cakes, sorbet, frozen yogurt, and gelato.

Jerry Greenfield American businessman

Jerry Greenfield is an American businessman and philanthropist. He is a co-founder of Ben & Jerry's Homemade Holdings, Inc.

Disinflation

Disinflation is a decrease in the rate of inflation – a slowdown in the rate of increase of the general price level of goods and services in a nation's gross domestic product over time. It is the opposite of reflation. Disinflation occurs when the increase in the “consumer price level” slows down from the previous period when the prices were rising.

Shrink wrap

Shrink wrap, also shrink film, is a material made up of polymer plastic film. When heat is applied, it shrinks tightly over whatever it is covering. Heat can be applied with a handheld heat gun, or the product and film can pass through a heat tunnel on a conveyor.

Milka Confectionery brand primarily sold in Europe

Milka is a brand of chocolate confectionary, originally made in Switzerland since 1901 by Suchard. It has then been produced in Lörrach, Germany for the past 100 years. Since 2012 it has been owned by US-based company Mondelez International, when it started following the steps of its predecessor Kraft Foods Inc., which had taken over the brand in 1990. It is sold in bars and a number of novelty shapes for Easter and Christmas. Products with the Milka brand also include chocolate-covered cookies and biscuits.

Maltesers Confectionery product made by Mars

Maltesers are a British confectionery product manufactured by Mars, Incorporated. First sold in the UK in 1937, they were originally aimed at women. They have since been sold in Europe, Australia, New Zealand, Canada, and, since 2017, the US and Middle East. The slogan is "The lighter way to enjoy chocolate".

Squround Container with a shape between a square and a round tub

A squround is a container whose shape is between a square and a round tub. It resembles an oval but is sometimes closer to a rectangle with rounded corners. These allow the contents to be easily scooped out of the container. The name is a portmanteau for "square round" (cartons), referring to a compromise between a square and a round carton. It is also sometimes known as the scround.

Caramello Koala

Caramello Koala is a brand of chocolate treat currently manufactured by Cadbury Australia. It consists of a chocolate cartoon koala with a caramel centre.

In statistics, shrinkage is the reduction in the effects of sampling variation. In regression analysis, a fitted relationship appears to perform less well on a new data set than on the data set used for fitting. In particular the value of the coefficient of determination 'shrinks'. This idea is complementary to overfitting and, separately, to the standard adjustment made in the coefficient of determination to compensate for the subjunctive effects of further sampling, like controlling for the potential of new explanatory terms improving the model by chance: that is, the adjustment formula itself provides "shrinkage." But the adjustment formula yields an artificial shrinkage.

A product's average price is the result of dividing the product's total sales revenue by the total units sold. When one product is sold in variants, such as bottle sizes, managers must define "comparable" units. Average prices can be calculated by weighting different unit selling prices by the percentage of unit sales (mix) for each product variant. If we use a standard, rather than an actual mix of sizes and product varieties, the result is price per statistical unit. Statistical units are also called equivalent units.

ReaLemon Juice

ReaLemon is an American brand of lemon juice that debuted in 1934, and is manufactured and marketed as of 2016 by Mott's, part of Keurig Dr Pepper. ReaLime is a brand of lime juice that debuted in 1944, is produced in the same manner as ReaLemon, and is also produced and marketed by Mott's.

Dimensional stability is the change of dimensions in textile products when they are washed or relaxed. The change is always expressed relative to the dimensions before the exposure of washing or relaxing. Shrinkage is also called residual shrinkage and measured in percentage. The major cause of shrinkages is the release of stresses and strains introduced in manufacturing processes. Textile manufacturing is based on the conversion of fiber into yarn, yarn into fabric, includes spinning, weaving, or knitting, etc. The fabric passes through many inevitable changes and mechanical forces during this journey. When the products are immersed in water, the water acts as a relaxing medium, and all stresses and strains are relaxed and the fabric tries to come back to its original state. The dimensional stability of textile materials is an important quality parameter. Failing and unstable materials can cause deforming of the garments or products. Shrinkage is tested at various stages, but most importantly before cutting the fabric into further sewn products and after cutting and sewing prior to supplying the products to buyers and consumers. It is a required parameter of quality control to ensure the sizes of the products to avoid any complaints regarding deformation or change in dimensions after domestic laundry. The tests are conducted with provided specifications of buyers imitating the same conditions like washing cycle time, temperature and water ratio and fabric load and sometimes top loading and front loading washing machines are chosen to authenticate the test and assurance of the results. This procedure provides standard and alternate home laundering conditions using an automatic washing machine. While the procedure includes several options, it is not possible to include every existing combination of laundering parameters. The test is applicable to all fabrics and end products suitable for home laundering.

References

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  5. "That Shrinking Feeling". Merriam Webster dictionary. Retrieved 21 January 2019.
  6. 1 2 "ECB Meets To Tackle Deflation While Ignoring Shrinkflation". London: Goldcore. 4 September 2014. Retrieved 7 July 2020.
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  8. Sewraz, Reena (21 February 2017). "Shrinkflation: the food and drink items that have shrunk but aren't any cheaper". lovemoney.com. London, UK: lovemoney.com. Retrieved 7 July 2020. Ratula Chakraborty, senior lecturer in business management at the University of East Anglia, said: "Shrinkflation is a sneaky practice because consumers are not expecting any size changes so do not inspect package sizes unless there is a really noticeable difference."
  9. Studman, Anna (23 February 2019). "Shrinking products: are we paying more for less?". Which?. London, UK: Which?. Retrieved 7 July 2020.
  10. 1 2 "Shrinkflation: How many of our products are getting smaller?". Office for National Statistics . Retrieved 2021-03-13.
  11. 1 2 3 4 "VAT rises but food shrinks". Daily Mirror . Retrieved 2014-06-09.
  12. Yogurt cups not quite a full cup these days, Pittsburgh Post-Gazette, Thursday, July 3, 2003
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  17. Milka se nenápadně zmenšuje, cena ale zůstává stejná. Obalové triky jen tak nepoznáte - Aktuálně.cz
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