A WORD FROM THE AUTHOR: Hi everyone! I hope you’re doing well! I stumbled across this article from NPR’s Planet Money this past Monday. I want to bring awareness to the phenomenon of how inflation could appear in a different way than rising consumer costs. If you don’t already, be sure to subscribe to Planet Money’s email newsletter. Their articles are incredibly well-written and cover interesting topics. As always, I’m not a financial advisor but someone who enjoys writing about personal finance.
Downsizing vs. Shrinkflation
When you think of downsizing, you think of employees being laid off due to economic hardships. Maybe there’s a company a consolidation? Or what if the company is cutting costs to improve profit? Regardless, downsizing is also a term to characterize the change in the size of consumer goods over time as a result of inflation.
To better differentiate the terms from one another, economist Pippa Malmgren, created the word shrinkflation to specifically define when your box of cereal decreases in size but the price remains the same.
A Bag of Chips
I swear when I was a kid that there was never that much air within a bag of chips as today. Nowadays when I split open a bag, it’s nearly 50% air. This is a great allegory for shrinkflation.
As the chip bag producer seeks to cut costs and turn a profit, they pump more air into the bag with fewer chips per bag. The cost remains the same, a bag of chips is a bag of chips, however, the amount of chips you receive is drastically different.
Shrinkflation, or downsizing, is probably as old as mass consumerism. Over the years, Dworsky [article writer] has documented the downsizing of everything from Doritos to baby shampoo to ranch dressing. "The downsizing tends to happen when manufacturers face some type of pricing pressure," he says. For example, if the price of gasoline or grain goes up.
Shrinkflation is Hitting the Shelves
When you go to your local grocery store now, be vigilant for shrinkflation. It has crept onto the shelves of our grocery shelves by means of toilet paper, cereal boxes, and other daily goods.
There is nothing you can ultimately do about shrinkflation but inform companies through your purchases that you prefer larger value options to get more squeeze for your dollar.
Now you know why you’re running out of toilet paper much quicker than ever before.
Read the full Planet Money article here.
Have a good week,
Jordan