Shrinkflation : Concern
Shrinkflation is again became a topic of concern within the fast-moving consumer goods (FMCG) industry.
- As input costs rise, companies are faced with the challenge of maintaining profitability while also addressing consumer needs.
- Shrinkflation refers to the practice of reducing the size of a product while maintaining its sticker price.
- It’s a form of hidden inflation.
- Companies, especially in the food and beverage industries, employ this strategy to stealthily boost profit margins or maintain them in the face of rising input costs.
- Shrinkflation involves reducing the quantity or volume of a product while keeping the retail price unchanged.
- Companies use shrinkflation to improve profit margins without overtly raising prices.
- In macroeconomic context shrinkflation can also refer to a situation where the economy contracts while experiencing rising prices.
- Causes:
- Higher Production Costs: Rising costs of ingredients, raw materials, energy, and labour lead companies to downsize products.
- Intense Market Competition: In competitive markets, producers seek ways to maintain customer favour and profits simultaneously.
