Shrinkflation

On the assumption that you have heard the term “Getting more for less” which if you haven’t heard of it, means that you get more value for a lower price. This is considered a good deal particularly for the consumer. However, as the broken system of Capitalism, and its incessant drive for unending growth and increasing profits, every quarter would have it, businesses usually employ some measures to artificially generate those returns and profits for their shareholders.

Shrinkflation is one of those tactics and measures that are being used by businesses. Shrinkflation is the practice of altering products or packaging so consumers get less while the prices stay the same (or even increase). In essence, you are “Getting less for more” For example, the shape of the Gatorade bottle changed, the old bottle held 32 ounces and the new shape now holds 28 ounces, slightly insignificant but again, less for more. Pepsico said that they changed the bottle shape to make it easier to hold. These companies rely on the fact that the end consumer doesn’t really remember the shape and size of the packaging coupled with the fact that the reduction on the micro-scale is insignificant but on the macro-scale, it leads to incredible cost savings for the company. In terms of the Gatorade example, the 4 ounces may not really matter to one individual but that means, if the math checks out, for every 7 bottles they sell, they save the equivalent of filling up 1 extra 28-ounce bottle which means they get to sell even more. In the UK, Listerine Fresh Burst mouthwash shrank from 600ml to 500ml, but the prices subsequently rose by 52p in Tesco. This meant that the consumers paid 21% more for 17% less. Equalling to a unit price per 100ml increase of 46%. Similarly, PG Tips The Tasty Decaf Pyramid tea bags went from containing 180 teabags to just 140 at several supermarkets. While many retailers also dropped the price, at Ocado the price actually rose from £4 to £5.09 despite the size reduction — that’s 22% less tea for a 27% higher price or a 64% cost increase per tea bag.

I have recently become obsessed with perfumes and in the industry there are reformulations which usually occur, to update or improve the scent which usually means changing the ingredients without changing the smell. There have been reformulations to my favourite and nostalgic perfume brands, for example, the Paco Rabanne Black X’s which holds “scentimental” value to me has been reformulated and also become the victim of shrinkflation. When reading the notes and ingredients of the reformulated perfume I realised that not only did the reformulated perfume have an increased dilution percentage of the perfume oil, but it contained different and inferior quality of ingredients. This is called Skimpflation and occurs when the company “skimps” (cuts back) on the quality of the product or service while it maintains the same price, or even increases the price of it so that it can still be profitable. It differs from shrinkflationn as it has to do with the quality of a thing and not volume or size. This has affected most if not all industries from the fashion industry, and the rise of polyester in clothing or inferior leather in luxury products, to the aircraft industry which serves progressively worse in-flight food if it provides it at all.

The problem with Shrinflation and Skimpflation is that it is not sustainable and there is no “ground” level, a baseline that the quality, size and amount would not go below. Companies have a regular corporate spiel that they use to respond to the public outcry and backlash. The typical response is: ‘We’re facing higher costs for raw materials. We’re facing higher labour costs. We’re facing higher gas prices.’ It suggests to me that manufacturers are very cognisant that consumers will notice more readily a price increase, rather than a decrease in product, quantity, or size of the package and that the raw material cost and the labour costs are much more than compensated for their price increases, and there is no reason whatsoever to decrease the quality or the quantity in the packages that we’re so used to. In essence, there is no reason for them to shrink or skimp on the product while also increasing the price of the item. This is done just because they wish to declared record-breaking profit levels to their shareholders every quarter. The problem with that is that for every quarter that record profits are declared, the company has to exceed the previous level as that previous level would be considered the new normal and would be considered the bare minimum to the shareholders in the next quarter. That means, if Walmart for example declares $4Bn in record profits in Q1 of 2024, shareholders would expect at the Q2 meeting, profits exceeding $4Bn as the Q1 profits would be the new baseline. [The Guardian]