Context: Mondelez, parent company of UK chocolate-maker Cadbury has announced that its 200g Dairy Milk bar will shrink by 10 per cent.
“Shrinkflation” is the phenomenon of products getting smaller while their price remains the same.
It is a sign of an inflation economy i.e., as the price of ingredients rise, companies cut the size of their products (or the number of products in a multipack) and hope their customers won’t notice.
It is basically a form of hidden inflation. Companies are aware that customers will likely spot product price increases and so opt to reduce the size of them instead, mindful that minimal shrinkage will probably go unnoticed by them.
Through this, more money is squeezed out not by lifting prices but by charging the same amount for a package containing a little bit less.
This is usually done to avoid demand destruction- the idea that beyond a certain price, consumer demand doesn’t just drop, it disappears.