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Wednesday, September 17, 2014

Shrinkflation

Ah, yes, the practice of reducing the quantity or quality of a product in order to save manufacturing costs. Katya Sandino writes about this phenomena at the Outsider's Club, and notes that it is a precursor to true inflation:
If you feel like you're getting less for your money these days, inflation isn't the only reason why. 
There's also “shrinkflation,” which is what it's called when a company shrinks the size of its product, rather than raise its price. And its a disturbing trend that was last seen in the 1970s, right before the more traditional inflationary increase in prices. 
... Of course, at some point, a product can't get any smaller. And so the only option left is to raise prices, and inflation proper sets in. 
That's what happened in the '70s. Firms cut corners until there were no corners left to cut. Only then did we see a huge surge in prices. 
And we could be seeing the exact same pattern now.
On a related note, even as the consumer price index (CPI) supposedly fell 0.2% last month, ground beef has now passed the $4 per pound mark. From the article:
A year ago, in August 2013, the average price for a pound of ground beef was $3.454 per pound. Since then, it has climbed 55.9 cents--or about 16.2 percent. 
Just five years ago, in August 2009, the average price for a pound of ground beef was $2.134, according to the BLS. The price has since climbed by $1.879 per pound—or 88.1 percent.
Related Posts: "Global Stagflation?"

2 comments:

  1. It was a couple of years ago that toilet paper went from 4.5 inches wide to 4.1 inches wide. And, the length of each "sheet" also shrank. Measuring several different samples, the actual amount of toilet paper on each roll shrank by 10 to 25% depending on the brand.

    Another dimension of "shrinkflation" is a reduction in the quality of ingredients. Part of my food storage is Hormel Completes meals, which I rotate by eating them for lunch. Hormel reduced ingredient quality by reducing the amount of meat in each meal. Hormel has also discontinued some varieties, replacing them with cheaper to manufacture varieties.

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    1. I've noticed the same in many products. For instance, the water content of Pace picante sauce has noticeably increased over the last year. Another tactic I see is reducing the quality or quantity of ingredients, and then passing it off a "healthy version"--something I suspect is behind Pizza Hut's Skinny Slice pizza that reduces ingredients supposedly to reduce calories. (http://www.dailymail.co.uk/news/article-2759981/Less-dough-fewer-toppings-slimmer-waist-Pizza-Hut-test-market-new-Skinny-Slice-reduces-ingredients-cut-calories.html)

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