Product Shrinkage is a Price Increase

As the cost of inputs rise companies are looking to pass those costs onto you in the form of price increases. This is a form of inflation we need to be wary about. Have you noticed that the Snickers bars are smaller than they were a few years ago and Doritos bags have less ounces/grams? This is a form of pricing in which instead of raising prices companies make the product smaller to keep their margins. Sneaky.

What would cause the prices of inputs and products to rise?

  • Higher oil prices for transportation and plastics content
  • Tariffs/ Import duties on imported items and components within the item
  • Commodities prices like sugar, cocoa, cereal grains
  • Labor costs here and abroad
  • Consolidations/mergers in the supply chain
Note how thin this cereal box is compared to an Iphone 6

What you can do as a consumer

  • Don’t just look at the box and the price. Look at how much it actually contains when cross shopping brands. Look at weight and liquid ounces. Or grams and liters if you prefer.
  • Trade down to a cheaper brand if you don’t want to pay the increase
  • Use coupons and promotions
  • Don’t buy at all. Cost avoidance is the best way to make money.
  • Buy in bulk at warehouse clubs if this is an item you use a lot of
  • Wait for it to come on sale and then pantry load if you use a lot of it. This means stock up when the price is good and then don’t buy until the price falls again to your desired level. This is often a game of chicken between the consumer and the manufacturer

Some traps to be aware of

  • Shrinking product sizes ala the chips bag example
  • Multi packs that contain less units. So 10 granola bars instead of 12 bars.
  • Measuring cups that are purposely hard to read. For example on the Tide detergent lid the measurement line is nearly impossible to see on a blue cap. On top of that the liquid is also blue. There is no way to know what the right amount is. One can only approximate. This is intentional to get the consumer to use more of the concentrated liquid and you will likely get less loads from the bottle than stated. More usage means more bottles of detergent get sold.
  • Not including some key piece like batteries that are sold separately
  • Shorter return policies. I noticed at Best Buy the return window is now 15 days instead of 30 days. Act fast if you want to return it.
  • Changing formulations. Some colognes and perfumes may smell different than you remember for example. Less scent = less cost.
  • Substituting cheaper ingredients. That beef patty could be 20% soy or the dog food has a lower meat content than before.

Leave a Reply

Please log in using one of these methods to post your comment: Logo

You are commenting using your account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s