What is Shrinkflation: Farmers and owners of many brands adopt all kinds of tactics to expand their business. People who are not involved in business do not know its terms very well. There is a term in business called ‘Shrinkflation’, which is used to expand the business. Very few people know it by this name, but when it is explained in simple language, you will say ‘Oh yes, this happens often’. Let us know what is shrinkflation and how does it work?

What is ‘shrinkflation’?
You must have seen many times that the price of chips, biscuits, soap or any other packed item remains the same but the contents inside the packet reduce. This is called Shrinkflation. In simple words, when companies reduce the quantity or weight of a product instead of increasing its price, it is called shrinkflation.

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How does shrinkflation work?
In shrinkflation, the price of the product remains the same for years, but the quantity of the product is reduced. Due to this, the customer does not see any change in the price, but he gets less goods than before.

For example, we have been eating Parle G biscuits since childhood, its packet costs only Rs 10 since then till today. But if you notice, the biscuits inside have reduced, this is just shrinkage. Similar thing is happening with things like chocolate, Maggi etc.

Why do companies do this?
When the costs of raw materials, packaging, labor and transportation increase, companies face the challenge of maintaining profits. In such a situation, instead of directly increasing the price, they reduce the quantity of the product. By doing this, the customers do not get shocked by the price increase, the company’s profit also remains intact and not only this, there is not much impact on sales.

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How do brand owners and sellers benefit?
Due to shrinkflation, brand owners are able to preserve their profits despite rising costs. If they directly increase the price, customers may switch to another brand. Therefore many companies control costs simply by reducing them.

So when the demand for a product remains intact and the company’s profit remains safe, then it continues production. Due to this, the purchase of agricultural products like wheat, potatoes, sugar, milk, oil seeds etc. also continues. As production increases, the demand for farmers’ produce remains intact, which can also benefit their business.