Since the outbreak of the pandemic, many consumers have complained about another issue: the products they buy, ranging from paper products to drinks, are becoming smaller yet the prices do not change or even rise. This phenomenon can be explained by the changes that occurred in the supply chain during the global crisis, which is referred to as shrinkflation. However, it remains relevant, even though the supply chain challenges that started to stabilize do not seem to have affected its development in any significant manner. In this article, we explain why shrinkflation has not gone away and explore some possible explanations for this.
Shrinkflation: An Overview
Shrinkflation was initially a response to supply chain issues and labor shortages, along with transportation challenges caused by the pandemic. These factors forced manufacturers to cut down product sizes instead of increasing prices due to the shortage of raw materials and high production costs. However, as supply chain issues are slowly being solved, other factors such as inflation—especially in the cost of raw materials, fuel, and transportation—continue to put pressure on production costs. Consequently, many companies are responding by reducing packaging size to ensure they can maintain their prices without increasing them visibly.
According to Ilker Erkose, a supply chain manager with more than 20 years of experience in global operations, this is why shrinkflation still occurs: “It is also because of inflationary pressures that are still intact and are even intensified by the supply chain issues. From the rise in fuel prices to the lack of certain raw materials, the costs are transferred to the consumers, although in terms of quantity rather than price.”
Impact on Consumers and Products
This has been especially noticeable in everyday products in recent years. Recently, even orange juice has joined the list of products that have been affected by shrinkflation. Consumers have complained that these products have become smaller, yet their prices have not decreased and, in some cases, have even increased. The situation leaves consumers feeling frustrated, especially because the reduced packaging is not always communicated to them clearly at checkout.
Ilker continues, “What remains important to note is that shrinkflation can change a consumer’s buying experience through the notion of value. When a product size is changed and the new size is not well communicated, this may create a feeling of being cheated, which in turn affects brand loyalty and trust. This is why there is a need for more transparency and awareness among consumers.”
Will manufacturers ever return to producing larger containers or lower prices? Ilker shared this. “The pressure to reduce costs while simultaneously enhancing profitability is great, especially in sectors that are sensitive to the fluctuating prices of raw materials and complicated logistics systems. It is possible, however, that some prices will be normalized as the supply chain issues are resolved, but most companies will not opt for larger sizes if the costs of raw materials keep rising. Thus, they may consider changes in packaging or ways to minimize resource use in the production process.”
What Can Consumers Do to Counteract Shrinkflation?
One approach is to purchase products in larger quantities because larger packages are often less expensive per unit. Consumers can also compare prices for the same product at different stores and opt for generic products that may not have been affected by recent price increases. Furthermore, understanding the current and future market and supply chain conditions can assist consumers in making wiser purchasing decisions.
Ilker concludes, “Consumers can exercise some control by being strategic about their consumption and adjusting their buying patterns based on price per unit, not just the overall price. Knowing the current and future conditions of the supply chain can help consumers make more informed decisions.”
It is unlikely that shrinkflation will be discontinued shortly, but understanding the reasons behind its occurrence and being prepared can help consumers make better choices. Despite the challenges manufacturers face, remaining knowledgeable and adjusting consumption patterns are key to navigating these conditions.
