Kyoda.
I'm Chelsea Daniels and this is the Front Page, a daily podcast presented.
By the New Zealand Herald. Ever feel like you're getting.
Less bang for your buck at the supermarket, Well you might be right. As production costs rise, many companies have been resorting to what's called shrink flation. Rather than raising the cost to the consumer, they make the product smaller
while charging the same price. According to a Global Inflation Monitor survey in twenty twenty three, forty six percent of consumers said that they have noticed shrink flation, with fifty five percent of Kiwi consumers noticing at the tactic and the same amount stating the practice was an unacceptable response to rising costs. Today, on the Front we're joined by Massive University marketing professor Bodo Lang to discuss the ethics
behind shrink flation. First off, Bodo, what exactly is shrink flation?
So shrinkflation is really the same as inflation, but in a slightly different manner. You're paying more for the same product, but rather than inflation, what it means is that you're paying the same price as before, but you're getting less product for it. So inflation really just means you're paying you know, the prices are increasing, but the product quantity is saying the same. Shrinkflation means you're paying the same but you're actually getting less product for it.
How long has this concept of shrink flation been around for It's.
Been around for a long time, and I think it's certainly become more and more frequent the more data that retailers and manufacturers have had about how consumers respond to different marketing stimuli, increasing price, for example, and so once they've cottoned on to the fact that consumers are very sensitive to price changes because price is often advertised very heavily in advertisements at the point of sales, and it's generally the most important, certainly one of the most important
attributes that people look at when they make a purchase. So therefore, changes in price are highly likely to result in a reduction of people buying that particular product and trimflation. So keeping the price the same but setting slightly less product, so let's say, ten percent less product for the same price, is a sneaky way to get around that effect, because most consumers would not have an idea that the quantity of the product that they're buying is decreasing.
Right, So there's more of an opportunity for the consumer to realize the price has gone up rather than their product decreasing.
Noticing the increase in quantity of a product is extremely unlikely. You know, just think of how you and I might go shopping in a supermarket or anywhere else really for that matter, whether there's you know, one hundred nails or nineteen nails in a box at a doi store, or whether I get you know, maybe one kg or nine hundred grams of a cheese. You know, those are things
that are that are pretty well hidden. And certainly when it comes to can products and things like this, I would say virtually no consumer checks the quantity that they're buying. They always check the price, but I would say virtually never do they check their quantity. And obviously unit pricing, which will become mandatory, is one way around this and
making this visible. But on the downside of this is if everybody in a category, so let's say cheeses or milks or whatever it is, or chocolate, if everybody in that category is shrink flating, so they're keeping the price the same but they're reducing the quantity, then that effect is still invisible to consumers because the unit price across all of the products is decreasing or it's changing at the same time.
What sort of products are we saying becoming victims of this?
Certainly products that are fast moving, so we call them in the trade FMCG, so fast moving consumer goods. So really anything in retail, and particularly growth through a retail where people don't have a lot of time, they make purchases frequently and the point of sale is saturated with products. The typical New Zealand supermarket has tens of thousands of products,
so hiding these quantity decreases is really really easy. And the types of products that would be particularly prone to this would be products where consumers are particularly price sensitive, So you know, where manufacturers know that consumers will react negatively to a price increase, they will just simply decrease the quantity without anybody noticing.
That's our cracking down on corporations engage in price galleging interceptive pricing. In fact, the snack companies think you will notice if they chase the size of the bag and put a hell of a lot fewer same size bag, put fewer chips in it. No, I'm not joking. It's called stringflation, you get charge the same amount you got about I don't know ten percent fewer snickers in it, to be.
Honest, it could be anything. And I think the best example of how not to do it I can think of is probably Cadbury from some years ago. They made three changes to their product and they've never recovered from that compromise position. They've their market sally has shrunk incredibly
since then. And the opposite of how to do it, how to deal with increasing raw ingredient prices, is probably really nicely showcased by Whittakers who just in the last few months said, look, the cost of our raw ingredients is increasing. We don't want to sacrifice the quality of chocolate because we're really proud of it. Therefore we're really sorry, but we have to put up the price. And their
price increase was pretty hefty. But I think they've just done a really textbog marketing job of being transparent, maintaining
trust with consumers and explaining why they're doing it. So they could have hidden this, you know, instead of two hundred and fifty grams, maybe you only getting two hundred and twenty five grams, but people would have gotten onto this and in the age of social media, I think there is bound to be a backlash, particularly for a product that people buy for hedonic reasons, so for enjoyment.
What did Cabri do?
So?
Petbury did three things. This is quite a few years ago now. So they changed the formulation of their products, so they went from vegetable oil to palm oil because that was cheaper. They changed the packaging and they also changed the sizing. And so they did three things in quick succession. And I think it was incredibly ill conceived.
You can just see how it would have occurred somebody somewhere sitting in front of a spreadsheet, not really thinking about how people feel about chocolate and the emotional connection and all this sort of stuff, just going we need
to make more money on this. And then they made these three changes in quick succession, and to put it loosely, they got absolutely hammered by the market and their market share just shrunk away, sizzled away, and Whittakers, you know, at the time, a relatively small New Zealand manufacturer of chocolate,
was the sole benefittor pretty much of that disaster. And I don't think Cadbury is anywhere close to where they were back then in market share, so they're still suffering from those consequences.
Could this be a temporary issue in some cases? I mean, could we see some products return to their original size given the backlash they receive, or have we not actually seen that yet?
Like to be an optimist, and I would love to be able to say I think we will see those coming back, but I think the realist in me says there is no way that's going to happen. Just as prices generally never decrease, you know, after the global financial crisis, after the COVID pandemic, you know, they were short term increases in prices, but those prices never come down again. And I think we will see the same thing here.
Unless there is a really robust consumer revolt and a basically boycotting of a particular brand of a particular product, then the manufacturer might say, well, actually, we've listened to consumers, which is what they should do in the first place, if they did good marketing, and we've gone back to the original quantity, we haven't compromised on the ingredients, and we will try to keep the old price for as
long as we can. I think there is a very small chance that some selected brands might react to that if there is sufficient backlash from consumers, but by and large, I don't think we will see those prices or coming down all those quantities going back up again.
What should we be on the lookout for at the supermarket?
Supermarkets in New Zealand.
Are already starting to show unit pricing right correck, So is that something that we need to take more notice of.
There's a raft of suggestions that you know, research has shown work really well. So the first one is go shopping with a shopping list. Second one is go and have a look online to see where you can actually get the product for the least money. Because just something is on special somewhere doesn't mean that that's actually the
lowest price. Certainly, stockpile products when they're available at a particularly low price, and that is particularly sensible for products that you may not consume more of just because we happened serve them at home. So an example would be, I don't know, dishwashing liquid or table salt or toilet paper.
An example of where this could backfire would be products that we might consume more of when we have more of them at home, and the typical example for me would be chocolate, so buy more when the price is low and stockpile them. If you can, definitely go shopping with a shopping list, go and have a look on line at prices to save money, and you can save
significant amounts. I mean, there's a lot of research that was published in the last twelve months here in New Zealand of how much variation there is in supermarket prices across an identical item over even just six weeks, and consumers can make huge amounts of saving that will easily outpace inflation. So it's actually a little bit of work, but it's quite easy to save money on groceries if you want to put your mind to it.
Is there anything that could stop shrinkflation from happening because it's not a legal Is.
It not illegal? Absolutely? Any manufacturer can do it, and you know it is in a way fair enough. If their prices go up for raw ingredients, then they need to somehow pass it on if they want to maintain their current profit levels. Certainly not illegal. What could stop it? I think the one thing I could think of is that generally brands are very quick in pointing out if something has improved, so they might have a little sticker on saying new improved recipe or new flame or something,
and it's relatively cheap to do that. Maybe it could be manatorid legislation. Basically, if there is a longer term quantity change in the product, if the government were to regulate and say, look, you've got to actually notify people off this, just tell them that you're selling them ten percent less now, because as I said earlier, I think there is virtually no chance that consumers would discover this by themselves.
You haven't met my dad, then I reckon he would clue on.
But he's few and far between, isn't he the ones that actually sit down and go through the unit pricing and how much you get for your buck.
This morning, the cookie monster has had enough. His beef with shrink flation is getting attention on Capitol Hill. After he posted quote me hate shrink flation, me cookies are getting smaller. Senator Shared Brown responded, me too, cookie monster. People in my state of Ohio are fed up. They should get all the cookie they pay for.
In terms of the supermarket Commissioner, I know that that we when we speak about supermarkets, we're usually talking about price gouging and then not they're not being enough competition. Is this something that should really be perhaps on that commissioner's radar.
I think it should be, and I would be surprised if it wasn't already on the grocery commissioner's radar, because it's a really rampant issue, I think, particularly in FMCGs and grocery retailing. I think, to be honest, it is misleading consumers because the chances of them discovering this. So if he had one thousand people going shopping and they buy fifty items each, and let's say twenty percent of those were somehow shrinking, I think very few consumers would
detect all of that shrinkage. In fact, I would say nobody would detect all of that shrinkage. So it is misleading consumers because they assume, probably quite rightly, that the quantity they bought last week is still the quantity this week. But of course that's not That shrinkage is not being advertised manufacturers.
And so would your main piece of advice to manufacturers just be open and honest, don't try and sneaky your way through it.
Yeah, I think it depends on what sort of brand you have, And this is obviously where the power of marketing comes in. Woodeckers has a fantastic brand that is one of the most trusted brands in New Zealand, and so they can do this and this will further enhance their trust. Many of these other brands, they're global, multinational companies that are humongers in size, and people don't really know the brand. They certainly don't know the company, but
they might know the brand. I think if the brand is suitable and has that sort of base, I think that could be one way forward to say, look, this is what we're doing, and you know, advertising these things via social media is relatively straightforward. I think in an age of increased consumer skepticism, it is really just good practice to be as transparent as one can be to avoid consumer backlash because, as we know from Cadbury, some brands just never recover again.
And lastly, what are some examples that have really got your goat?
This is a good question. So I don't go grocery shopping all too often, but I certainly have noticed that over the last couple of years, you know, cheeses have become available in all sorts of sizes, and so you think you're spending less, but actually really you're spending more. Because you're spending you're probably paying the same amount of money for, you know, a greatly reduced quantity of cheese.
And what gets me there always is, you know, I can't get my head around how this is possible with one of the world's largest dairy manufacturers here in the country. So I always struggle with that in comparing it to prices that I know exists overseas, where you know, we can get cheeses for a lot less, And so I think if a product is a really high in price here and unreasonably so in my view, then I think gre inflation really irks me.
Thanks for joining us, bodo my pleasure.
That's it for this episode of The Front Page. You can read more about today's stories and extensive news coverage at enziherld dot co dot nz. The Front Page is produced by Ethan Seals. Patty Fox and Richard Martin are the sound engineers. I'm Chelsea Daniels. Subscribe to The Front Page on iHeartRadio or wherever you get your podcasts, and tune in tomorrow for another look behind the headlines.