In other words, you get less for the same price. To boost profit margins, many companies in the food and beverage industries hope consumers don’t notice the smaller amount offered at the same price. Consumers notice price increases more than quantity decreases.

This is a common strategy for offsetting higher production costs and maintaining market share. Production costs can be raises in raw materials or labor, among other factors. To keep customers from switching to other brands because of price increases, many companies employ Shrinkflation.

If consumers notice that a brand is employing Shrinkflation it can have a detrimental effect on consumer sentiment. Since the Covid 19 Pandemic this has been a familiar tactic as companies are trying to offset higher production and shipping costs. Since before March 2020, consumers are paying up to 10 percent more at the grocery store, CBSNews.com reported in June 2021.

“This is partly due to an imbalance in supply and demand, with Oxford Economics pointing to the reopening of the U.S. economy as putting new pressure on retailers, restaurants, and other businesses. For instance, restaurants — which shut off purchases of meat and other supplies last year when the pandemic shuttered the economy — are now ramping up purchase orders to meet the resurgent demand from consumers.”

With rising labor, production, and shipping costs projected to continue, Shrinkflation is surely here to stay. Be sure to check quantity amounts and not just price and brand when shopping to see if your favorite brands are employing this strategy.

Sources: https://www.investopedia.com/terms/s/shrinkflation.asp
https://www.cbsnews.com/news/grocery-prices-rise-supermarkets/