What is shrinkflation?

  • As input prices rise, the FMCG (Fast-Moving customer Goods) category confronts the prospect of decreasing packaging, affecting customer choices and business dynamics.
  • Shrinkflation is a commercial practice in which corporations lower the size or quantity of a product while keeping the price same.

Causes of Shrinkflation:

  1. Cost management enables businesses to manage rising production costs, such as raw materials or labour, without jeopardising profitability.
  2. Market Competition: In competitive marketplaces, businesses may employ shrinkflation to maintain market share by keeping prices competitive.

Effects of Shrinkflation:

  • Consumer Perception: If consumers notice the shift, it may result in bad opinions of the brand, a loss of trust, and decreased customer loyalty.
  • Inflation measurement accuracy is hampered by shrinkflation, which occurs when the price remains constant while the quantity declines.
  • Limitations: Businesses may only use shrinkflation quietly and for a limited time before customers become aware and react negatively. Overuse might harm brand reputation. 

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