How Shrinkflation is Affecting the Price of Products

It’s no secret that prices at the pump, grocery store, lumber yard, your local restaurants, and pretty much everywhere else have been steadily rising over the past year. We’re no longer strangers to above-average inflation. But what you may not have noticed is prices staying the same while the packaging shrinks.

If it sounds slightly shady to you, you’re not wrong. Shrinkflation is a sly tactic to inflate prices and save profit margins without overtly rising sticker prices.

What is Shrinkflation?

Shrinkflation or “shrink-inflation” is a term used to describe a situation where the price-per-unit of a good increases, but the overall price of the product remains the same. The consumer pays the same price for fewer goods or a “shrunk” package. For example, if a 12-pack of toilet paper costs $8.99 before inflation, the seller may decide to keep the price at $8.99 but reduce the number of rolls in the pack to 8.

While this is an obvious example, companies also shrink products in more subtle ways, such as changing the shape or slightly reducing the size of their product. If you’ve ever opened a bag of potato chips and realized it’s only half full, you’ve experienced shrinkflation.

This is one way for businesses to combat rising costs without rising the price visible to the customer. However, this doesn’t change the fact that the customer is getting less for the price they pay. And if customers notice that they are paying the same price for less value, it could reflect poorly on the company and result in lost business.

What Products are Experiencing Shrinkflation?

Historically, shrinkflation is most common among food and beverage products, which makes sense, as these items are often sold in packs. These products are where we’re seeing shrinkflation occur today as well, in addition to household items.

The above examples are very real. Toilet paper rolls are containing fewer sheets of toilet paper per roll, and chip bags of the same size are containing fewer ounces of chips.

If you enjoy candy, you may also notice lighter multipacks and fewer candy bars per pack. In fact, it’s hard to go anywhere in the grocery store without seeing shrinkflation’s impact. Everything from cereal boxes to ice cream cartons is in smaller containers now than it was a year or two ago—goodbye gallon-sized tubs of rainbow sherbet.

Pretty much anything that comes in a weighted or numbered package, be it dog food or coffee, is subject to shrinkflation.

Why is this happening? Well, it’s been a tactic used by companies to boost profits for a long time, but it has gotten worse due to inflation. As the cost of inputs, i.e., ingredients, labor, and manufacturing, rises, businesses need to raise prices in order to maintain profit margins.

Shrinkflation will likely continue to occur as costs rise and will surely occur in the future. Both companies and consumers should be aware of its impact on the goods they buy and sell.

As always, stay up to date on news that can impact your investments or business via our blog. If you are a company looking to find accredited investors who meet the investor criteria necessary to invest in 506(b) vs 506(c) offerings, contact us at Verify Investor to get started.