Manufacturers need to be careful while using shrinkflation methods to reduce costs: the consequences can be costly.

Shrinkflation is not a new phenomenon: jam jars, coffee containers and crisp packets are just a handful of the products that have downsized while their prices remained the same. To avoid upping costs, manufacturers often add less product, reduce packaging sizes, or use cheaper ingredients. It is a popular method companies use to avoid raising prices that may scare off customers.

Practical considerations

Companies communicate several reasons for making these choices. For example, product innovation in the form of more sustainable packaging or new and improved formulas has cost implications.

On a practical note, introducing new packaging requires investment on the part of manufacturers. The supply chain, design, and packaging often require updates, and the demand for specific materials, such as paper or plastic, also shifts.

There are also regulatory requirements manufacturers must abide by. For instance, when a manufacturer wants to reduce plastic packaging, the machines must be adjusted to ensure no structural overfilling or underfilling. This is crucial in a competitive market and is legally required to ensure consistent, fair pricing of goods. Or for example, if the government introduces legislation on calories or sugars, manufacturers will have to conform to these pre-determined quantities.

Maintaining consumer confidence

Shrinkflation as a solution is often considered because of the sensitivities around increasing prices, with customers potentially tempted to switch to cheaper options if faced with a price hike.

It is therefore necessary that the prices and the contents of the packaging are measured fairly and accurately. Notified bodies such as NMi ensure the weights in packaged goods meet regulatory requirements. This regulatory check, in turn, supports consumer confidence when purchasing new products. By guaranteeing their measurements are accurate, manufacturers can avoid severe consequences when adjusting their standard packaging quantities.

Don’t get caught out!

Communication with customers about the adjustments made is crucial. Otherwise, prices may be deceiving. You only have to look at the case of Toblerone, the Swiss chocolate bar with its characteristic peaks. The chocolate producer reverted to their original shape after putting “too much space” between its peaks, weakening the rights of its trademark. The change was initially made because of higher costs for numerous ingredients, and owner Mondelez said that the exchange rate was not favourable after Brexit.

The British chocolate maker Cadbury also shrank its multipack chocolate bars in a bid to keep retail prices down. According to the Financial Times, they now contain no more than 200 calories, similar to a handful of carrots. Even prominent businesses have cause to shrink their packaging size. However, learning how to do so effectively while complying with applicable standards is essential.

Price sensitivity to remain

A 2019 study by the office for national statistics has shown that between September 2015 and June 2017, more products shrank (206) rather than increased (79) in size. However, their prices tended not to change.

It is, therefore, important for consumers to consider more factors than just the price. Ultimately, it is their decision whether they want to buy the product. The same goes for manufacturers: customer loyalty is not easy to win but very easy to lose. Sensitivity to prices will remain, which means that shrinkflation strategies will remain and accuracy measures will be needed.