Wow! A large packet of chips! Perfect! But once you open it? 80% air and 20% chips… where did the chips vanish? Well, surprise surprise this could be because of an economic concept! One packet of potato chips used to be just enough to last one ODI cricket world cup match a few years ago. Nowadays at the same price, that chips packet hardly lasts the first innings of a T20 cricket match. Ever wondered where that precious quantity of chips go? What if I tell you this is because of a type of hidden inflation? Surprised? Like the price of the chips packet is the same and didn’t increase so how can it be inflation? But this is real! Inflation doesn’t only affect the prices, it can be masked by altering the quantity of the products too! The concept is called Shrinkflation and knowing about it will surely make you habitual to turn around the pack and check the quantity from hereon! Let’s read on…
What is Inflation?
As usual sticking to the simplest of terms, prices of goods and services rises by some percentage in the economy over the years. This price rise percentage is called inflation. Mainly this general increase in price is due to a rise in demand for goods and services which is not matched by the supply, thus leading to a shortage and an inevitable rise in prices. For example taking the cost of milk, it used to be approximately only Rs. 15 per litre in the year 2000 (It was roughly only Rs. 8 in 1980s!) and in 2025, if you consider the toned milk packets they cost on an average Rs. 55! This price hike is accredited to inflation over the years!
Inflation Numbers Explained
The numbers and statistics in newspapers or articles can surely confuse you but it’s simple maths! If inflation is 4% then your money buys only 96% of what you used to get earlier. You have to shell out more money if you want the same basket of goods and services!
The Mystery of Shrinkflation
Understanding a change in prices is comparatively easier. Not only can we compare it instantly but the availability of a base price for comparison is provided easily too! But sometimes the prices of goods or services remains the same, just their quantity reduces by a significant amount! This is Shrinkflation, at the same price one gets a reduced quantity of the product!
Once upon a time a Rs. 20 packet of chips lasted one full movie that too while sharing with friends! Now it gets over before the interval and that too without the sharing part. Nope! We didn’t get greedy but it’s actually the quantity that has reduced a lot. In fact a few years ago, one used to get 95 grams of chips for Rs. 20, now the same ones cost Rs. 20 but you only get 47 grams…
The bad part is it’s not you who is reducing the quantity but the producer of goods and services. Often it’s a masked version of inflation that is not noticed immediately.
Why Do Manufacturers Reduce Quantity But Keep Pricing Same?
Inflation affects the production costs too! When the manufacturers face a rise in production costs, they have the option to either increase the price of goods or mask this price rise by reducing the quantity of goods. Shrinkflation is when they avoid directly increasing the price so that the product doesn’t seem expensive to the consumer on the face value!
Is Cost Push Inflation and Shrinkflation Same?
One type of inflation is also called cost push inflation. Cost push inflation basically means when there is a general increase in prices of goods and services across the economy, because the cost of production rose significantly for the manufacturers. They offset this cost by increasing the prices.
Shrinkflation also does the same but it’s different from cost push inflation. Both increase the price per unit. But they impact the consumer differently, in cost push inflation, the price rise is visible but in shrinkflation the price rise is hidden as it’s the quantity that gets reduced at the same price!
Which Industry is Most Susceptible to Shrinkflation?
Very honestly we all know the answer! It’s mainly the regular everyday household things! It’s easy to maintain the same price and reduce the quantity of say chips, soaps, biscuits, breads, etc. In tech terms shrinkflation is more commonly visible in FMCG i.e. the Fast-Moving Consumer Goods sector!
How Shinkflation Affects You as a Consumer?
Both normal inflation and shrinkflation affect the purchasing power only. In price terms, inflation means you have to pay more price to get the same quantity. While when we consider shrinkflation, at the same price, you are getting less quantity. Here it’s just that the roles have reversed.
Is Shrinflation Good or Bad?
From a consumer point of view, shrinkflation is definitely not good! Unknowingly they are paying more per unit. For the brands too it can become a problem in the long run because if the customers start noticing the reduced quantity, it can lead to a loss of trust!
Is Inflation Bad?
Whether it’s inflation or shrinkflation, both can be a little painful for the consumer. After all, no one likes to shell out more money, right? If we consider inflation, it mainly affects in the following way.
1. The purchasing power gets considerably reduced.
2. Overall the basket of goods and services especially the essentials become expensive.
3. One needs to cut back on savings as spendings increases. It can even lead to erosion of savings.
4. Some buying plans might get postponed too if they don’t fit the budget any longer.
5. A general sentiment of uncertainty starts persisting as the price rise pinches the daily budget.
Sigh! That sounds terrible but a moderate inflation is not actually bad! From an economy’s point of view, maintaining a moderate level of inflation is a must and the government’s monetary policy often reflects the same too. Mainly it can help in increasing investments, leading to a rise in spending and in the short term can even reduce unemployment as an increased demand of goods and services leads to more job opportunities! A silver lining for sure!
Phew! Who knew checking the quantity of your favourite goodies is so important? Surely learning Economics can help you in becoming a smart consumer too! Next time you buy your favorite chips, do try to compare their quantity with an older chips packet (if you have it saved somewhere!). Or maybe you just need to refill your favourite container to check if your favourite biscuit packet still fills it like last year?
Time to check not only the ingredients label on your favourite goodies but also the ‘quantity’ you are getting! Did you enjoy learning about this interesting concept? Do share your thoughts in the comments section below!