Shrinkflation points to pricing pressures

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br choc Bloomberg In 2011, Cadbury lopped two squares of chocolate from the Dairy Milk bar, holding the price unchanged. Photo: Bloomberg

INFLATION may be lurking in the aisles of supermarkets. Even with price pressures tame to non-existent in the industrial world, economist Pippa Malmgren says that they are there if you look.

A former adviser to US ex-president George W Bush, Malmgren is zeroing in on what has come to be known as “shrinkflation” – where companies charge consumers the same, or more, for less.

That may foreshadow an overall jump in prices, an alarm she has been sounding for a while. “Shrinking the size of goods is exactly what happened in the 1970s just before inflation proper set in,” she writes in her new book, Signals: The Breakdown of the Social Contract and the Rise of Geopolitics.

It also explains why people are so agitated by a higher cost of living, writes Malmgren, who founded London-based consultancy DRPM Group.

Take the Dairy Milk bar produced by Kraft Foods’s Cadbury unit. In 2011, the company lopped two squares of chocolate from the snack, while holding the price unchanged.

At the time, the company cited rising costs. Last year, it made the corners of the bar more rounded, reducing the weight. The UK consumer group Which? turned up other examples in a study it conducted last year. It found boxes of Nestlé’s Shredded Wheat cereal had shrunk to 470g from 525g yet still cost £2.68 (R47).

Just last month, Carlsberg, the fourth-largest brewer, said it was putting less beer in some bottles in its Russian market and making others smaller in what it called a bid to avoid raising prices. Companies typically blame the moves on the rising cost of commodities and other ingredients.

“We always aim to offer our consumers great value for money for the brands they love,” Nestlé spokesman Len Bennett said. “Occasionally we make changes to the size of our products, driven by a number of factors, including anything from a product reformulation to a change in packaging or changes to ingredient costs.

“Resale price is at the sole discretion of the retailer.”

Malmgren is more worried. “There are signals that prices are starting to rise, or that inflation pressures are building,” she writes. – Bloomberg

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