Economists are worrying about inflation as the economy opens up after the pandemic. In manufacturing, shrinkflation may be the thing we meet most often.
What is shrinkflation?
Nutella has an alternative to raising prices on their products. Instead, they’re making their packages hold a bit less. The 400 gram jar will now hold 350. The 750 gram jar will hold 700 grams. The 900 gram jar will actually be a 750 gram jar. The prices won’t change.
They will be labeled correctly, but many shoppers won’t realize the jars are a little smaller. Consumers often know the price of the items they buy, but don’t know the amount of product that’s in the container. If they don’t see the two packages next to each other, they may not realize the size has changed.
Brands usually present shrinkflation as a way to avoid raising prices. They are raising prices, of course, if you count the price per gram. But shoppers won’t have to pay more than they’re used to paying for a jar.
A lot of it going around
General Mills changed the contents of cereal boxes from 19.3 ounces to 18.1 ounces. Same price. Charmin toilet paper is getting smaller — the size of the sheets, specifically, so the rolls can continue to claim the same number of sheets. Royal Canin cat food went from 5.9 ounce cans to 5.1 ounce cans.
Many consumer goods are doing this. It’s usually a response to rising costs of raw materials. But the rising costs of raw materials, and much of the rising costs of food and other consumer goods, also reflects rising post-pandemic labor costs and disruption in trucking.
U.S. companies are having to raise their pay scales to tempt workers back to the factories. Parts of the supply chains that got thrown out of whack by the pandemic are taking some time to recalibrate and get back on track.
What does this mean for manufacturers?
A lot of our clients are in packaging. Packaging has faced a lot of changes recently, for reasons from diversity awareness to environmental responsibility. New packages must keep the same shape as the old ones, or maybe get a little taller and skinnier, to disguise the change in contents.
A dip in the bottom, instead of a flat bottom, can hide a few missing ounces. Changes in color and font can distract people from the shrinking.
Manufacturers need to be prepared to make the new packaging and to fill it correctly with the new quantities. It’s opportunity to add value.
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