Understanding Shrinkflation: A Growing Trend in Consumer Goods
In the world of consumer goods, few topics have sparked as much discussion—and controversy—as the reduction in package sizes. What appears to many as merely a thinner bag of potato chips is, in fact, a strategic move by brands to survive in these challenging times. This phenomenon is known as “shrinkflation,” a term that combines “shrink” (reduce) and “inflation” (inflation), essentially meaning you’re given less product for the same price.
The Economics of Shrinkflation
In countries like Mexico, raising prices is a delicate matter. Consumers are price-conscious, so increasing a product from $10 to $10.50 or $11 could significantly decrease sales. Thus, many brands opt to slightly reduce content to maintain those “magic” prices.
- Examples: Less grams of potatoes, fewer cookies, or candies in the same packaging but with less quantity.
However, it’s not solely due to inflation. In Mexico, regulations further complicate the situation. Since 2020, laws require products high in sugar, fats, or calories to carry black labels on packaging, warning consumers about their high content. Reducing portion sizes sometimes helps avoid these labels, as a lighter package means fewer calories. This way, brands maintain an attractive price while avoiding the “bad reputation” of carrying a label that many perceive as “forbidden.”
Regulations and School Snacks
The situation becomes more complex when considering school snacks. Regulations only allow products with fewer calories and fewer “indulgent” ingredients. For brands, reducing sizes can open the door to this market. A 30-gram snack might not pass the test, but a 15-gram one could be sold in school stores. Of course, this doesn’t guarantee compliance with all requirements, but it’s one of the most common ways to try.
The Challenges of Shrinkflation
Reducing package size isn’t as simple as it seems. It’s not just about fitting less product into the same bag. Redesigning packages, altering production processes, adjusting materials, and sometimes generating a new barcode due to changes in inventory and logistics all cost money and time. Additionally, shipping boxes, pallets, and recalculating truck space occupancy are necessary adjustments.
From a retail perspective, a smaller package is essentially a new product. It requires system registration with all its features, price and margin definition, and rearranging store shelves. Updating labels, training staff, and explaining the reduced quantity to customers also fall under this category.
Consumer Reaction: The Unpredictable Factor
The most unpredictable aspect is consumer reaction. Will people accept paying the same for less product? Often, the answer is no, and they feel disappointed or deceived. Remember that previously, strategies like “20% more free” or “extra weight without cost” were popular sales hooks. Today, less has become the new normal in many categories, or at least the only way to avoid price increases.
Key Questions and Answers
- What is shrinkflation? Shrinkflation refers to brands reducing the amount of product in packaging while keeping prices the same.
- Why do brands use shrinkflation? Brands employ shrinkflation to maintain affordable prices amidst rising costs, inflation, and stricter regulations.
- How do regulations impact shrinkflation? Regulations, such as black labels for high-calorie products, encourage brands to reduce portion sizes.
- What challenges does shrinkflation pose for retailers? Retailers must adapt to smaller packages by updating systems, recalculating space usage, and training staff.
- How do consumers react to shrinkflation? Consumer reactions vary, with some feeling deceived by receiving less product for the same price.
In conclusion, shrinkflation is here to stay, driven by economic pressure and increasingly strict regulations. The significant challenge for brands is ensuring consumers perceive value despite smaller packages. In the retail world, every gram counts, and even a couple of pesos can make all the difference between success and oblivion.
