As input prices turn inflationary, the spectre of shrinkflation looms large within the Fast-Moving Consumer Goods (FMCG) segment.
About Shrinkflation:
It occurs when goods shrink in size but consumers pay the same price. It occurs when manufacturers downsize products to offset higher production costs but keep retail prices same.
It is basically a form of hidden inflation. Instead of increasing the price of a product, producers reduce the size of the product while maintaining the same price.
The absolute price of the product doesn’t go up, but the price per unit of weight or volume has increased.
Reasons: The reasons for shrinkflation are rising production costs and market competition.
Impacts:
Shrinkflation runs the risk of turning customers away from a product or brand if they notice they are getting less for the same price.
Another downside of shrinkflation is that it makes it harder to accurately measure price changes or inflation.
The price point becomes misleading since the product size cannot always be considered in terms of measuring the basket of goods.
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