In every retail category, a growing number of manufacturers are reducing the size of their products to compensate for rising costs.
Disruptions in global delivery chains are driving up costs for raw materials, labour and transport. So suppliers need to economise. Shrinkflation helps brands to save money and stabilise prices by reducing the volume or weight of a product.
Various popular brands for consumer goods have recently shown signs of shrinking, especially in the food, drinks and personal care categories.
They emphasise that the reduced size of products is far more manageable than price increases.
Other reasons brands are giving for deliberately shrinking relate to social well-being, including environmental considerations, consumer diversity and improved product quality. For example, a spokesperson for General Mills has said that the shrink film used around products instead of cardboard boxes allows for more products to fit onto their trucks, as a result of which they need fewer trucks and are able to reduce fuel emissions.
All in all, the shrinking of products has put FMCG suppliers in a position to stabilise prices despite the current difficult economic reality.
The American consultation company Morning Consult investigated the response from customers when their favourite products became victims to shrinkflation. Up to 49% moved to a different brand and 48% chose a ‘B’ brand or private label product.
This practice is 100% legal, as long as the products are clearly and accurately labelled. For transparency, the supermarkets in Belgium are already required to show prices per unit so that consumers can see how much weight they are getting for their money.
Retailers may also have to deal with suppliers that are limiting the weight, and at the same time, raising prices, increasing the risk of dissatisfied customers. Retailers need to anticipate customer resistance to shrinking and the impact on range, weigh up price strategies and look, together with the producers, for solutions to improve customer perception.
Now more than ever, major retailers are positioning their private labels as high-quality, affordable alternatives. In this era of inflation, this will stimulate the sale of the house brands while negatively impacting the sales of ‘A’ brands.Consumers show frustration and resilience.
As a result of the rising inflation, more consumers have become more conscious of prices. Daily necessities such as fuel and groceries have now become more expensive. Factor in the shrinkflation on top of this and it’s understandable that consumers would feel frustrated when they pay the same amount for fewer products.
Consumers far more likely to check the unit price for a product instead of looking at the sale price to see how much weight they are getting for that price.
In France, with the help of consumers and by investigating old catalogues, foodwatch, an organisation that campaigns for transparency in the food sector, has measured how large an impact shrinkflation has had on package content and price. They looked into various references from major FMCG suppliers and found that products have become an average 12% lighter and that the price per kilo or litre has risen by 25%.
New research by FoodNavigator suggests that when they dub the shrinking of articles as ‘portion control’ – the repackaging of articles in portions that are more suited for weight control and a better diet – the consumer may reward them. The product may be relaunched as a more conscious choice for customers who want to follow a balanced daily diet with portions per person. From their research, it appears that 58% of the consumers surveyed eat less than before the pandemic and that 42% choose products that are proportioned by the producer.
The producers therefore need to safeguard their margins, but must keep an eye on consumer frustration. Through use of portioning and the relaunch of a product, the perception of the customer can be influenced and sales safeguarded.
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