Several scholars have defined Shrinkflation as the process by which a good or a product is reduced by size or quantity while the price of the product is maintained. According to the study carried out by Furceri et al., Shrinkflation is an alternative means that sellers have assumed to increase the price of goods (2016, p.671). Davidson et al., on the other hand, points out that shrinkflation is a disguised form of inflation that is applied to products sold to consumers (2016, p.567). Inflation and shrinkflation are co-related although inflation refers to the increase in the price of goods and services over a period, which contributes to the higher cost of living (Craven and Gausden 2001, p. 29). Inflation limits the purchasing power of people since the value of money also drops as the prices increase. Shrinkflation can thus be categorized as a form of inflation according to Jones et al., since the cost of goods is rising, but the sellers do not want to imply the increase in price directly. Thus, they choose to reduce the quantity of the product while maintaining the cost so that the buyers will think they are still purchasing the same amount at the same price (2014, p.149). Shrinkflation is a form of fraud since buyers end up spending more without actually realizing that.
The study by Veljanovski points out the opposite of shrinkflation, which is an increase in the size of the product without causing any change in the price (2014, p.142). The latter approach is sporadic since most producers are after gaining the attention of the buyers which they can achieve by reducing the rate of the product instead of increasing the size and maintaining the cost of purchase. Most buyers pay less attention to the size, but more attention to the price and that is why shrinkflation has been found as a proper means of increasing the costs given that most buyers would barely notice the change in the quantity. Shrinkflation varies with the usage and the UK economy according to the research carried out by Boardman since it is the ideal place that has faced shrinkflation from 2016 to 2017 (2011, p.63). The UK has suffered depreciation in the pound, which has placed a lot of pressure in most of the companies producing goods since the rise in price has caused a resultant increase in importation which worsens the current situation. Tiwari et al., also mention that the growth of real wage is slow (2017, p.445). The implication is that the buyers are very sensitive to the change in the prices, which means that shrinkflation was the only appropriate means that could have been applied.
TYPES AND REASONS FOR APPLICATION FOR SHRINKATION
There are several types of shrinkflation according to the research carried out by several scholars. According to Willett and Laney, one of the kinds of inflation is Sticky prices; the form of shrinkflation where there is a difficulty for the producers to pass the inflation effect to the consumers directly and as a result, have opted to undertake alternative means to apply the change in the prices (2014, p.125). For instance, if the cost of drinks from vending machines cost 120 euros in 2012, then an increase in taxation is applied in 2014, it would be difficult to sell the drink at a price higher than 120 euros, and as a result, shrinkflation has to be implemented by either reducing the size of the mugs used to serve the drinks. Another study points out that packaging has been used as the means to apply shrinkflation while still making the product attractive to the consumers (Barr and Campbell, 2007, p.381). While some consumers are complaining about the increase in prices, some are finding it fun to explore new approaches applied to the packaging because they tend to be more attractive.
Other studies also suggest commodity shrinkflation as the other type that is applied by producers. There is an increase in competition by different producers, and it has been found to be more accessible to cut on the size of the commodity rather than increase the price of the product as pricing is one of the factors that contribute to high competition (Nellis and Parker 2004, p.114). When a consumer goes to purchase a good, they are more interested in the price. Research shows that when prices are displayed, consumers will be more interested. A survey carried out that involved interviewing random buyers in different stores in the UK suggested that consumers need prices to plan their budget. Most shy away from purchasing or from asking the cost of the price if they are not tagged to the products since they may be relatively expensive than the way they had planned which may be inconvenient for them. People prefer to have price labeled on the goods so that they can make a free choice. Pinstrup-Andersen mentions that if prices have been tagged and there are several options, consumers will pick a larger item that goes for a lower price (2015, p.119). Price is, therefore, necessary, as is the price. Shrinkflation of commodities is, as a result, a new way of disguising the size of the products while maintaining the rate, which many consumers have not been able to notice quickly and as a result is a smart way of competing for the producers.
Affordability shrinkflation is closely related to the latter, and in this type, the means applied is reducing the size to offer affordability to the consumers. If one liter of milk used to go for three euros, most consumers would be able to buy it, however, if the same milk were to be sold at four euros, purchasers would find it difficult to purchase it compared to when the same milk would have been offered for three euros for 750 ml in a similar container. Shrinkflation is thus applied to provide affordability for consumers. Housing is also another issue in the UK undergoing shrinkflation; smaller houses are being offered at a similar price as one that was provided for a home that was slightly bigger (Munro 2018, p.20). There has been an increase in the demand for housing in the UK by scholars, natives, and tourists who need accommodation, which has caused the size to be reduced while same prices being applied to ensure the consumers can afford it. Other researchers, however, argue that it does not make sense to reduce the size and still charge the same amount to offer affordability given that there already exist smaller products at a lower price that people have the freedom of choice depending on their budget and their purchasing capability.
New design trends have caused a change in the size resulting in dematerialization shrinkflation. One of the products that continually undergo dematerialization is technological products. When mobile phones were introduced, they were large and could barely fit in the palm of a hand while the prices charged were high since the cost of production was high. As smarter ways of production were discovered, the cost of production was reduced, and the size of the products yet in some cases, the price of sale for the product was still same given that new improvements had been incorporated (Lloyd, McCorriston, and Morgan, 2015, p. 28). Mobile phones were later turned into smartphones that were bigger, then after some time were smaller and more expensive due to the new features that they incorporated. Dematerialization involves the improvement in design and increase in innovation, which makes products potentially valuable while the size is reduced. Less material is used in the production to cut on costs to be passed to the consumers.
The research carried out by different scholars suggests that the calculation of this type of shrinkflation may be very complicated due to quality changes rather than mere size changes. With changes in technology, a single formula cannot be developed as it will be obsolete in a short period due to the sophistication of technology when compared to that of food and drink products. Furceri et al., points out a different reason for application of shrinkflation, which is justifying salaries through the increase of revenue and reduction of costs (2016, p.668). Revenue and cost is another type of shrinkflation commonly applied. Shampoos and other beauty products fall prey to this scheme since the packaging of the shampoo can be easily disguised so that one cannot be able to notice any change in volume. The method is potential for increasing the revenue while cutting on costs of production. This reason is malicious that the consumer is the one who is most exploited given that they are provided with products at a higher cost without their consent.
IDENTITY AND ADJUSTING WEIGHT CHANGES
The research carried out by Ochirova involves collection of prices at the end of every month from the UK shops and malls for most of the different goods supplied (2017, p.3). His research discovered that when they were collecting the prices, there was a notable change in the size of the products which they named ‘w’ that was then used to determine the accountability for the change in the size while there was maintenance in the cost of purchase. An 85g chocolate was used since its weight changed to 80g in six months. The researcher noted that there was a scheme applied called the ‘price relatives' that was developed from comparing its present price; the UK consumer price index, with the previous estimate which was used as the base price. Using the chocolate bar, the imputation formula applied is New base price = Current base price * New weight/old weight. The cost of the bar was 50p which means the new price will be, 0.50 * 80/85 = 0.471. The original relative rate will thus be, current price divided by the new base price, which means the cost has increased in the long run because of 0.50/0.471 = 1.062. The research by Hartley (2016), however, mentions that the formula is only limited to food products since the change in weight and size can be easily calculated (204). For products that involve design, a constant formula can’t be developed.
PRODUCTS THAT HAVE UNDERGONE SHRINKATION
The discussion by Willett and Laney on points out that a minimum of 2500 products has been shrunk in the past half a decade due to some of the reasons discussed above (2014, p.125). The study by Lennard et al., counters the argument by mentioning that most of the companies blame the Brexit whilst it has very little impact (2001, p.179). Chocolate brands according to Willett and Laney have been rated highest regarding shrinkflation (2014, p.126). The Toblerone brand of 2016 used to be 400g on an average, and after the shrinkflation, it weighs 360g. Cadbury 6g egg cream in 2015 was reduced to 5g; Terry's chocolate orange was 175g in 2016 and was later reduced to 157g. Mars bar that was 58g in 2013 decreased by seven grams to 51g. The change in size is minimal that the consumers can barely notice. However the expense on consumers is high since if the method is still applied to products that are more significant; they suffer much loss (Malmgren 2016, p. 29). Another shocking scale pointed that 2529 products have been reduced in size from 2013 from tea bags to chocolate bars. The timeline between the initiation of shrinkflation and Brexit is substantial, and Brexit cannot be blamed for the scheme applied. The study by Angner suggests that manufacturers and supermarkets are annoying given that never gave any announcements regarding the slice in sizes and packaging (2012, p.37). Shoppers end up getting less than what they think they are getting for their cash.
Most malls in London and others in the rest of the UK have cut sizes in products such as Maltesers by at least 15 percent from 121g (Cooper 2017, p. 210). Drinks such as Morland Old Speckled which used to be 500ml are now sold for the same price, but the quantity goes for 440ml. Mr. Kioling Slices have reduced by one, Tropicana 1.75 liters juice has been reduced to 1.6 liters and Bulmer’s cider that was in a 568ml bottle is now 12 percent lighter. Supermarkets are also cutting down on their brands, which mean the number of products being shrunk is increasing by the day. The graph below shows the size reductions that have been applied over the years from 2012.Customers are primarily being duped by the games played regarding the size and the prices. Ten sheets have gone missing in the bounty rolls while 0.14 liters has been sliced from average drinks being served from the beverage rooms. Cameran et al., mentions that food and drink products that have been shrunk are about two thousand, while other products that have been shrunk are about five hundred (2016, p.613). There is also a notable increase in the size of the products according to Liu et al., (2017, p. 113). Food products that have been increased are about three hundred-and-fourteen while other products are about three hundred.
Fig 1
Retrieved from: Milligan (2017)
IMPACT OF SHRINKATION
The discussions by several authors suggest that shrinkflation only has adverse effects. The National Statistics office published a report on shrinkflation, and according to them, shrinkflation is not as good as it may sound (Ochirova 2017, p. 5). From the description, about 2500 products had been shrankflated in the past half a decade, and the majority included food and drinks that were in high demand in the UK market and globally. The main complaint is on the chocolate bar; a bar has been reduced by at least ten percent, and when questions have been raised concerning this massive decrease in the size, the producers have built their complaints on the increase in the cost of materials needed for its production (Office For National Statistics 2017). The study by Foran et al., however, questioned the truth in blame placed on the cost of raw materials for chocolate production given that the UK government imported their sugar, which was a cheaper means while the cost of cocoa had dropped instead of increasing following the Brexit (2015, p.287). Breinlich et al., however, points out that the Brexit is the cause of the shrinkflation of the chocolate since the cost of acquiring raw materials for its production had increased since the European Union was the source of most of the products (2017, p.142). Other studies, in contrast, mention that the sizes of chocolate packaging started long before the Brexit despite many producers refusing to admit the fact. People are mainly not happy about the method applied since most of the products that they value are affected.
The study by Dhingra et al., suggests that shrinkflation is not a new concept and that it has been in existence for an extended period (2016, p.28). The Brexit, according to him had only made shrinkflation clear and contributed slightly to driving up costs of production, which have increased the method applied to shrinkflation. Shrinkflation implies that brands have the freedom of reducing the size of the products, as they wish while still asking for the same amount from the buyers. Merk et al., points out that shrinkflation does not contribute to inflation given that it has not had any effect on the entire inflation category (2015, p.107). He points out that the only classes that are associated with shrinkflation and inflation include sugar, chocolate, jam, syrups, and confectionery. Chocolate for instance, has contributed to an increase in inflation by 1.22 percent, which is a notable difference. Other studies such as the one carried out by Marteau et al., hint positive impacts of shrinkflation (2015, p.347). With reduced sizes of products, there is a reduction in consumption. Obesity is one of the epidemics in the UK and with the introduction of shrinkflation; the trend will probably reduce (Griffith, O'Connell, and Smith 2017, p. 814). Reduced sizes of the chocolate bars result are lower consumption of chocolate, which reduced the calorie intake and resultant obesity.
The other negative impact of shrinkflation according to Ranson et al., is the substitution in the UK suppliers (2015, p.97). With a reduction in size and maintenance of prices, consumers feel exploited, and they opt to find alternative sources of supply. The UK suppliers end up also losing contracts that are premier due to this. Chain manufacturers and stores are mainly in the losing end because their overall earnings drop and according to analysis, the pinch in the shopper's pockets cause them to shy away from making purchases, which reduces the revenues of the store by nine percent. Hunt and Wheeler counter the above argument given that shrinkflation is a means that had been formerly used by the Americans in their companies to shield their profits in the seventies when they experienced stagflation (2017, p.22). Smaller packages were assumed while the prices were kept to persuade the consumer to keep buying the product. Other studies also highlight that shrinkflation is a scheme that was applied to maximize profits and the Brexit has not caused significant changes in the cost of production (Domitrovic 2009, p.119). The difference in the recipe by Coca-Cola has, for instance, contributed to shrinkflation because some of the methods changed involved removal of sugar and a change in the coating, which caused the average soda to weigh less than it used to.
The study by Gourville and Koehler points out that in as much as most of the impacts of shrinkflation are negative; the method also poses a positive effect regarding ensuring sustainable business development in the UK (2004, p.213). If prices of goods were to be increased overnight, most of the consumers would choose to forge the products even if they had the purchasing power for they would feel like they are being exploited for no apparent reason, while the truth is that there is an increase in the cost of living. Shrinkflation has a mutual benefit for both the consumer and the producer because consumers will perceive a minimal change in the price as the size is reduced compared to when the cost of the products is increased (Hochman 2014, p.112). The producers would have otherwise opted to incorporate cheaper means of production and as a result compromise the quality of the product, which means they would have indirectly lied to the consumers about the quality of the produce, while the size and the price was maintained.
CONCLUSION
Shrinkflation is the reduction in the size of a product while maintaining the cost of purchase according to the discussions by several scholars. It is an alternative means that producers have used to increase the price of commodities. Some scholars argue that shrinkflation is as a result of inflation in the UK due to a number of factors such as Brexit, while others suggest that it is just an unscrupulous means that businesses have devised to rob innocent purchasers off their money. Other researches give an in depth analysis of the types of shrinkflation applied and the reason for application such as sticky prices, the need for competition, and a critique of the same is done by other scholars countering the argument passed. Another study has discussed the way in which shrinkflation can be calculated to determine the loss the consumer makes or estimate the price charged for a given product. Different researches have also highlighted some of the products that have been shrunk and others build on the study carried out by highlighting how consumers have been duped. The impacts of shrinkflation has been a topic of interest by the different scholars given that most associate shrinkflation with negativity, while others have pointed the benefits yielded by shrinkflation.
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