Know why chips are vanishing out of a retail pack

The not very unlawful act of shrinkflation has been the new business trend to combat the raw material price hike. FMCG companies are now cutting down on the quantity and/or quality of the products, keeping the price of the unit pack unchanged.

21 Feb 2023 | By Disha Chakraborty

Source: Trade Brains

Rural demand is one of the most important factors for the health of the FMCG sector. Daniel Leigh, division chief, research department, IMF, said, “Inflation in India as in other countries is expected to come down from 6.8% in 2022 to 5% in 2023 and then 4% coming towards the target in 2024.”

Mohit Malhotra said to a business daily, “The company has reduced the volume (also known as grammage) on certain products to protect the Rs 1, 5 and 10 sacred price points.” 

What is ‘shrink’flation?
To manage high raw material costs, several FMCG companies in India are downsizing product packets, without changing the price. Dubbed shrinkflation, this effectively means consumers are paying the same for less of the product.

Shrinkflation was quoted as "inflation's ugly cousin" or the "inflation you’re not supposed to see" in a June 2022 article published by ResearchGate. It is the practice of downsizing a product while keeping the MRP or final price constant. It can also be seen as an alternative to increasing prices of products. Shrinkflation is not unlawful as long as the important details like net weight, final price, ingredients and contents are distinctly labelled on the product.

What causes ‘shrink’flation?
Since the FMCG market is competitive, producers aim to reach a middle ground that keeps them from losing customers while maintaining their revenue growth. For better understanding, one example of shrinkflation is reducing the size of a chocolate bar from 55- to 50-gm but the price remaining the same. Secondly, cutting the number of days of an internet data pack from two months to 56 days but keeping the price unaltered. Shrinking the size of a cold drink bottle from 800 to 750-ml but the MRP remains unchanged is the most popular.

Few examples of Shrinkflation in India 

  • Haldiram has reduced the weight of its 55-gm of aloo bhujia packet to 42-gm
  • Nestle has reduced the weight of its earlier 80-g, Maggi to 55-gm. 
  • Soap brands like Vim have reduced the size of their soap from 155- to 135-gm. 
     
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