- June 3, 2021
- Posted by: Stratford Team
- Category: Markets
- Prices of most consumer goods are increasing across the board.
- Brands use shrinkflation to hide price increases from customers.
- Packages and boxes become smaller, but prices stay the same.
- See more stories on Insider’s business page.
Grocery trips are becoming more expensive, but you might not have noticed the extent of it.
Brands are increasingly turning to “shrinkflation” to avoid scaring off customers with high prices, instead keeping prices the same for smaller packages and less product.
Prices of furniture, household necessities, electronics, and nearly all other consumer goods are set to rise this year in a “perfect storm” of shipping delays, supply chain disruptions, and changes to demand because of the pandemic. Some companies, like Proctor & Gamble and Kimberly-Clark, have announced plans to raise prices.
When it comes to raising prices, companies have two options. “Do we raise the price knowing consumers will see it and grumble about it? Or do we give them a little bit less and accomplish the same thing? Often it’s easier to do the latter,” consumer advocate Edgar Dworsky told The Washington Post.
Sometimes, brands will change container shape or type to mask the decrease in product. Coca-Cola CEO James Quincey said that the company will increase prices “intelligently, thinking through the way we use package sizes and really optimize the price points for consumers.”
Costco Chief Financial Officer Richard Galanti pointed to these increases in an earnings call as “inflationary pressures” caused by growing labor costs, higher freight costs, higher transportation demands, container shortages, port delays, and increased demand for specific product categories.
Shrinkflation isn’t new. A 2019 report from the UK’s Office of National Statistics about Shrinkflation found 206 products that shrank between 2015 and 2017. Breads and cereals were the most likely to shrink over time, followed by personal care products and meat.
There was another large round of shrinkflation around the 2008 recession, according to Harvard Business School professor John Gourville. These changes usually align with economic downturns, experts say.
A subreddit dedicated to shrinkflation exists with more than 4,000 members, pointing out some examples of the sneaky packaging tactic. Users point out shrinkflation in Doritos, paper towels, deodorant, and more.
Bikes, cars, meat, cheese, and even ketchup are all becoming more expensive. Goldman Sachs analysts predict that increased prices will continue through at least the end of 2021 as the supply chain continues to grapple with disruptions and unpredictable demand.
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