Shrinkflation: How Companies Make You Pay More for Your Groceries

Food retailers across the country are using a sneaky tactic called “shrinkflation” to trick shoppers into paying more for groceries without raising the price of their products.

The war in Ukraine has seen Australia, like other countries around the world, crushed by inflation and soaring oil prices as disrupted supply chains drive up the cost of living.

But consumers are also being unknowingly stung by companies using a sneaky trick to reduce portion sizes while still charging customers the same price – or sometimes more.

Some of Australia’s favorite products fell slightly, including Cadbury, Smiths and Arnott’s Biscuits.

Economist Evan Lucas, chief market strategist at Investment Smart, said the practice was “stealth inflation.”

Australians have been hit by soaring grocery prices as the Russian-Ukrainian war disrupts global supply chains and drives up product costs

“It’s literally inflation that happens by changing the volume or weight of what you buy, but the price stays the same,” he told The Project on Sunday night.

POPULAR ARTICLES AFFECTED BY ‘SHRINKFLATION’:

  • Freddo Frogs – formerly 15g, now 12g
  • Tim Tams – formerly 11 cookies, now 9
  • (All varieties except original and white and dark chocolate, which are still 11 in number)
  • Smiths Chips – formerly 200g, now 170g
  • Pringles – formerly 200g, now 165g
  • Fun Size Maltesers – formerly 144g bag of 12 packs, now 132g bag of 11 packs
  • Toilet paper sheets – formerly 11cm, now 10cm

“It’s a mental thing – a psychological thing. You don’t realize what’s going on.

Products affected include new varieties Tim Tams, which previously had 11 biscuits and now have nine, Freddo Frogs, which weighed from 15g to 12g, and Smith crisps, which have been reduced from 200g per bag to 170g.

Pringles, which once weighed 200g, now weigh 165g per pack, while fun-sized Maltesers have dropped 144g to 132g.

And over the past few years toilet paper has gotten progressively smaller, with US multinational Kimberley Clark admitting in 2016 that it has reduced its rolls from 11cm to 10cm.

Although the strategy is not new, “shrinkflation” has increased amid the Covid pandemic and has become more visible to buyers in recent months as prices – in general – have soared.

Experts warn prices could continue to rise by around 10-20% as major supply chains are hampered by the conflict in Eastern Europe.

However, Mr Lucas said the contraction in inflation was more aggressive than standard inflation.

“If you look at inflation right now, it’s very high in food – around seven to eight percent,” he said.

“But if you think about it in terms of product weight loss, it’s not seven or eight percent. That’s 10, 12 and even up to 20% weight reduction for the same price.

Mr Lucas predicts that cereal products, such as wheat and maize, will be the next products grossly affected by “shrinkflation”, as 30% of the world’s supplies come from the Black Sea, which is on the southern shore of the Ukraine.

The grim economic prediction comes after a photo of iceberg lettuce selling for a whopping $5.50 caused a stir online last week as Australians come to grips with the harsh reality of the rising cost of living in the country.

The image, uploaded to Reddit on Tuesday, sparked fierce debate among Australians currently suffocated by soaring grocery and fuel prices.

Economist Evan Lucas (pictured) said the practice involves companies engaging in

Economist Evan Lucas (pictured) said the practice involves companies engaging in ‘stealth inflation’

Freddo Frogs, a popular chocolate bar from Cadbury, has been reduced from 15g to 12g in recent years

Freddo Frogs, a popular chocolate bar from Cadbury, has been reduced from 15g to 12g in recent years

“A few weeks ago when our supermarkets experienced a massive food shortage as a last resort, I went to my local Aldi to try and get some fresh fruit and veg,” one user explained.

“They had lettuce half that size and charged $5.50 each for them.”

“Almost everything I buy on a regular basis seems to have gone up 15-20%. The increases aren’t small,” another commented. ‘What’s going on?’

Earlier this month, Scott Morrison warned shoppers to expect food and petrol prices to rise after Russia invaded Ukraine and pressure mounted global inflationary.

Vladimir Putin’s war and the resulting financial sanctions against his regime have driven global oil prices to US$130, the highest level since 2008.

The result is Australian motorists paying an average of around $2.20 a liter and shelling out double what they would usually pay for some groceries.

World food prices have also risen because the ongoing conflict has closed ports in Ukraine, which is a major exporter of grains and vegetables.

Current food inflation is around 7-8%, with Mr Lucas warning that the contraction may be worse - reaching up to 20%.

Current food inflation is around 7-8%, with Mr Lucas warning that the contraction may be worse – reaching up to 20%.

“Food and grain prices are rising, which will pose challenges for low-income economies, including many in our own region,” the Prime Minister told the AFR Business Summit in a virtual address earlier this month.

“Rising commodity prices will be the most obvious transmission channel to Australia. Petrol prices in Australia have risen, as elsewhere.

Soaring fuel prices are also putting pressure on freight transportation, as trucking companies are forced to pass on the higher price of diesel to their customers.

The prices of soft drinks like Coca Cola and Fanta have risen, while Arnotts, the creator of Australia’s Tim Tams biscuits struggles to obtain essential ingredients.

Earlier this year, consumer groups One Big Switch and Frugl Grocery compared prices of common items in February 2021 and February 2022.

In many cases, prices have jumped at rates well above inflation, with double-digit annual increases for soft drinks, instant coffee, canned goods and ground meat.

Coca-Cola bottles of the same size jumped 60% from $2.85 to $4.55.

World food prices have risen because the ongoing conflict has closed ports in Ukraine, which is a major exporter of grains and vegetables (pictured, Coles store in Canberra)

World food prices have risen because the ongoing conflict has closed ports in Ukraine, which is a major exporter of grains and vegetables (pictured, Coles store in Canberra)

At Woolworths, a 10-pack of Kirks cans soared 70% from $6.20 to $10.55.

Instant coffee prices have also soared, with Nescafé and Moccona increasing by 50-74% at both supermarkets.

The price increases were well above Australia’s headline inflation rate of 3.5 per cent last year.

This came as Australian wages rose just 2.3% as rising inflation effectively eroded wage increases.

A Coles spokesperson said a number of factors were driving inflation for all retailers, including rising raw material costs, rising energy prices, transportation, extreme weather events and continued Covid-19 disruptions.

“We are supporting our suppliers in areas affected by recent flooding by visiting their sites to meet growers and understanding their individual impact, sourcing whatever product they have and continuing to work collaboratively with them in the weeks and months to come. come as they re-establish operations,” the spokesperson said.

“We are committed to continuing to build strong, multi-generational and collaborative partnerships with Australian farmers and growers, including long-term contracts, which is why so many growers want to work with Coles.

“These partnerships allow us to source directly from suppliers and help us get fresher, faster produce at great value for our customers.”

Vladimir Putin's war and the resulting financial sanctions against his regime have driven global oil prices to US$130, the highest level since 2008 (pictured, a woman refuels her car in Sydney)

Vladimir Putin’s war and the resulting financial sanctions against his regime have driven global oil prices to US$130, the highest level since 2008 (pictured, a woman refuels her car in Sydney)

About Marco C. Nichols

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