Don’t pay the same for less: how to stay on top of shrinkflation

WEALTH MANAGEMENT

Notice packages and products are getting smaller, with
no reduction in prices? Here are three tips for keeping
your bills for groceries and other products in check.

If you’re seeing fewer chips in the bag, smaller toilet paper
rolls or a different shape to your usual jug of orange juice,
you’re not imagining things.

Shrinkflation – a term used to describe the practice of selling
products with less quantity or volume at the same price by
reducing their size or packaging – is having an impact on
store shelves.

And Canadians are catching on. According to a recent report from Dalhousie University’s Agri-Food Analytics Lab, three out of four of us have noticed food products have shrunk, while prices have remained the same. And while personal care and other items are affected by shrinkflation, it’s groceries, meat products and bakery goods that are among the most obvious examples of the phenomenon.

Here are three ways to stay one step ahead of shrinkflation when browsing the aisles.

1. Understand how shrinkflation works

Shrinkflation comes down to some basic economics, explains Sridhar Moorthy, Manny Rotman Chair and
professor of marketing at the Rotman School of Management, University of Toronto.

As manufacturing costs go up, product prices tend to rise, he says. Currently, for example, supply chain
bottlenecks, labour shortages and COVID-related challenges are all contributing to rising prices.

In order to sustain their profit margins in such an environment, manufacturers have to decide what’s more
attractive: to increase the price of the product or shrink the size of the package, Moorthy says.

Manufacturers often opt for the latter, as research shows it is less noticeable. A 2014 Journal of Retailing study were four times more likely to purchase a product if the packaging was downsized than they were if the price increased and packaging stayed the same.

“People are more conditioned to look at prices than package sizes. Unit prices are posted precisely for that reason. However, many people don’t check unit prices and get misled as a result,” says Moorthy.

The true impact of shrinkflation is seen gradually, over months or even years, so it’s less noticeable to the consumer, adds Sylvain Charlebois, senior director of Dalhousie’s Agri-Food Analytics Lab and professor of food distribution and food policy.

“We’ll see cookies go from 15 to 17 [in a package], but smaller. Then they’ll go back to 15, but they won’t increase the size,” he says. “[Manufacturers] want to be subtle.”

2. Shop proactively

Canadian shopping habits are changing as food prices rise, indicates the Dalhousie report, with more than 40 percent of respondents saying they’ve altered behaviours to save money, including focusing more on sales and deals, reading flyers and cutting coupons.

This same awareness can be applied to shrinking products, say experts. In addition to checking packaging, product size and weight, consumers can compare unit pricing on display shelves. “In an inflationary environment, you should be more alert to the use of unit prices,” says Moorthy.

Using a mobile phone to check competitor pricing and calculate spending while shopping can also be useful – especially in view of the rise in e-commerce and click-and-collect grocery shopping. In those cases, products aren’t viewed in-person.

While shrinkflation is often perceived as sneaky, Charlebois argues that most grocery retailers provide pricing information, including unit pricing, to the consumer. Meanwhile, on a positive note, he adds that the practice reduces food and packaging waste in the long run.

“There is nothing hidden,” he says. In fact, “shrinkflation was designed based on our own expectations as consumers seeking cheap food all the time.”

3. Adjust your preferences

If you notice you’re paying the same price for less product, it’s also worth reviewing your own shopping habits, says CPA Jamie Smith, co-founder and CFO of Calgary-based Amplify Advisors.

Ask yourself if you need to buy that brand with a higher mark-up or if a more generic brand for a similar product will suffice. Also, if you’re committed to a brand, is there a different size – perhaps in bulk – that gives you a better unit price point? Can you reduce or cut out certain products altogether?

“Items of a particular quality or brand that [have been] your preference, may not be now that there’s a difference in price. There could be alternatives that are less costly,” she says.

When it comes to preferences, Canadians are reacting accordingly, says the Dalhousie study, with 49 per cent of participants reducing their meat product purchases in the past six months due to higher prices and 37.5 per cent buying more private – or house brand – labels compared to 2020. Discounted products near their expiry dates or “enjoy tonight” labels are also gaining in popularity.

These adjustments should be weighed against your budget and financial plan, adds Smith. “Start thinking a little harder about how you can make the most of your dollar,” she says.

This story first appeared on CPA Canada’s online news site.