- 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:
- Cost management enables businesses to manage rising production costs, such as raw materials or labour, without jeopardising profitability.
- 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.
Source: https://www.investopedia.com/terms/s/shrinkflation.asp