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Source- This post on Shrinkflation is based on the article “Shrinkflation makes its way back into FMCG“ published in “The Financial Express” on 15th April 2024.
Why in the News?
Recently, an increasing trend of shrinkflation has been observed in the Indian FMCG industry.
About Shrinkflation
1. About: Shrinkflation is a combination of two words “shrink” and “inflation,”. It refers to the reduction in product size.
2. It is a form of hidden inflation. It occurs when a product’s size decreases as a response to increasing production costs or market competition. For ex- Reducing the size of a chocolate bar from 55 grams to 50 grams but the price remaining the same or cutting the number of days of an internet data pack from two months to 56 days but keeping the price unaltered.
3. Causes: Businesses often resort to shrinkflation primarily due to high production costs and intense market competition. This tactic is primarily used in the food and beverage sectors. It increases the cost per unit to enhance profit margins.
4. Impact: It can complicate accurate inflation assessments. It can potentially drive consumers away if they realize they are receiving less value for the same price.
Read more: Inflation
