Shrinkflation – what is it and could it affect my business?
‘Shrinkflation’; when goods are made smaller but sold for the same price. One of the most infamous examples of Shrinkflation in recent times has been the decision made by the makers of Toblerone to widen the gap between their triangular chunks in 2016, causing a barrage of criticism worldwide. Although this public reaction was enough to cause the manufacturers to revert back to the original shape and increase the price. Mars decided to shrink Malteasers, M&Ms and Minstrels, and Birds Eye started putting 10 fish fingers in a packet instead of 12. Even some brands of cigarettes put 19 in a box instead of the standard 20.
According to the BBC, bread and breakfast cereals are found to include the most products impacted by shrinkflation.
Between September 2015 and June 2017, the Office of National Statistics identified 206 products that had shrank in size and 79 that had increased in size. It was noted that despite the EU referendum taking place during this time, there was no trend in how often the size changes occurred.
The figure below shows the ratio of size reductions to size increases for each distinct product.
The following figure indicates how the price changed when a size change occurred.
Shrinkflation is always a controversial topic because it appears to be done in such a sneaky way, and seemingly the manufacturers try and hide what they are doing in a hope that we, as consumers, will not notice. Simply put, it is hidden inflation. According to the Office of National Statistics (ONS), 3,000 food products alone have been reduced in size since 2012. The shrinkages are generally blamed on the rising cost of the raw materials, as opposed to the suggestion that it is to do with the effect of Brexit. Indeed, Mars and the makers of Toblerone both attributed the issue to rising costs of the manufacturing process.
The concept of hidden inflation is having a detrimental effect on a large proportion of consumers. For example, a grocery shop that once provided a week’s worth of food may now last less than a week but cost the same. Shrinkflation causes subtle changes but they are considerable enough to impact the average consumer’s bank balance over a long period of time. Particularly when considering, on many items, the shrinkage is not even known to the consumer. If it’s not chocolate then it is unlikely to hit the headlines.
The best advice that can be offered to consumers to combat the issue of Shrinkflation would be to use the like-for-like pricing information, so looking at the price ‘per kg’ or ‘per ml’ and so on, instead of the overall price. Furthermore, remember to not remain too loyal to brands; switch brands if you are not getting the value for money that you used to.
You may find that your business has been negatively impacted by the effects of Shrinkflation, possibly without it being glaringly obvious in the accounts. We would advise that you keep a close eye on any price increases from your suppliers or services and make sure that you are still getting the most for your money.
If you would like to learn more on the impact of inflation, shrinkflation or any other factors you feel may affect your business, Chamberlain & Co are here to help. Our insolvency practitioners have bases throughout the country in London, Sheffield, York and our head office is in the heart of Leeds City Centre. Give us a call to speak to one of our experts on 0113 868 1203.
