Speaker 1: Kyoda.
Speaker 2: I'm Chelsea Daniels and this is the Front Page, a
Speaker 2: daily podcast presented.
Speaker 3: By the New Zealand Herald. Ever feel like you're getting.
Speaker 2: Less bang for your buck at the supermarket, Well you
Speaker 2: might be right. As production costs rise, many companies have
Speaker 2: been resorting to what's called shrink flation. Rather than raising
Speaker 2: the cost to the consumer, they make the product smaller
Speaker 2: while charging the same price. According to a Global Inflation
Speaker 2: Monitor survey in twenty twenty three, forty six percent of
Speaker 2: consumers said that they have noticed shrink flation, with fifty
Speaker 2: five percent of Kiwi consumers noticing at the tactic and
Speaker 2: the same amount stating the practice was an unacceptable response
Speaker 2: to rising costs. Today, on the Front we're joined by
Speaker 2: Massive University marketing professor Bodo Lang to discuss the ethics
Speaker 2: behind shrink flation. First off, Bodo, what exactly is shrink flation?
Speaker 1: So shrinkflation is really the same as inflation, but in
Speaker 1: a slightly different manner. You're paying more for the same product,
Speaker 1: but rather than inflation, what it means is that you're
Speaker 1: paying the same price as before, but you're getting less
Speaker 1: product for it. So inflation really just means you're paying
Speaker 1: you know, the prices are increasing, but the product quantity
Speaker 1: is saying the same. Shrinkflation means you're paying the same
Speaker 1: but you're actually getting less product for it.
Speaker 3: How long has this concept of shrink flation been around
Speaker 3: for It's.
Speaker 1: Been around for a long time, and I think it's
Speaker 1: certainly become more and more frequent the more data that
Speaker 1: retailers and manufacturers have had about how consumers respond to
Speaker 1: different marketing stimuli, increasing price, for example, and so once
Speaker 1: they've cottoned on to the fact that consumers are very
Speaker 1: sensitive to price changes because price is often advertised very
Speaker 1: heavily in advertisements at the point of sales, and it's
Speaker 1: generally the most important, certainly one of the most important
Speaker 1: attributes that people look at when they make a purchase.
Speaker 1: So therefore, changes in price are highly likely to result
Speaker 1: in a reduction of people buying that particular product and trimflation.
Speaker 1: So keeping the price the same but setting slightly less product,
Speaker 1: so let's say, ten percent less product for the same price,
Speaker 1: is a sneaky way to get around that effect, because
Speaker 1: most consumers would not have an idea that the quantity
Speaker 1: of the product that they're buying is decreasing.
Speaker 2: Right, So there's more of an opportunity for the consumer
Speaker 2: to realize the price has gone up rather than their
Speaker 2: product decreasing.
Speaker 1: Noticing the increase in quantity of a product is extremely unlikely.
Speaker 1: You know, just think of how you and I might
Speaker 1: go shopping in a supermarket or anywhere else really for
Speaker 1: that matter, whether there's you know, one hundred nails or
Speaker 1: nineteen nails in a box at a doi store, or
Speaker 1: whether I get you know, maybe one kg or nine
Speaker 1: hundred grams of a cheese. You know, those are things
Speaker 1: that are that are pretty well hidden. And certainly when
Speaker 1: it comes to can products and things like this, I
Speaker 1: would say virtually no consumer checks the quantity that they're buying.
Speaker 1: They always check the price, but I would say virtually
Speaker 1: never do they check their quantity. And obviously unit pricing,
Speaker 1: which will become mandatory, is one way around this and
Speaker 1: making this visible. But on the downside of this is
Speaker 1: if everybody in a category, so let's say cheeses or
Speaker 1: milks or whatever it is, or chocolate, if everybody in
Speaker 1: that category is shrink flating, so they're keeping the price
Speaker 1: the same but they're reducing the quantity, then that effect
Speaker 1: is still invisible to consumers because the unit price across
Speaker 1: all of the products is decreasing or it's changing at
Speaker 1: the same time.
Speaker 2: What sort of products are we saying becoming victims of this?
Speaker 1: Certainly products that are fast moving, so we call them
Speaker 1: in the trade FMCG, so fast moving consumer goods. So
Speaker 1: really anything in retail, and particularly growth through a retail
Speaker 1: where people don't have a lot of time, they make
Speaker 1: purchases frequently and the point of sale is saturated with products.
Speaker 1: The typical New Zealand supermarket has tens of thousands of products,
Speaker 1: so hiding these quantity decreases is really really easy. And
Speaker 1: the types of products that would be particularly prone to
Speaker 1: this would be products where consumers are particularly price sensitive,
Speaker 1: So you know, where manufacturers know that consumers will react
Speaker 1: negatively to a price increase, they will just simply decrease
Speaker 1: the quantity without anybody noticing.
Speaker 4: That's our cracking down on corporations engage in price galleging
Speaker 4: interceptive pricing. In fact, the snack companies think you will
Speaker 4: notice if they chase the size of the bag and
Speaker 4: put a hell of a lot fewer same size bag,
Speaker 4: put fewer chips in it. No, I'm not joking. It's
Speaker 4: called stringflation, you get charge the same amount you got
Speaker 4: about I don't know ten percent fewer snickers in it,
Speaker 4: to be.
Speaker 1: Honest, it could be anything. And I think the best
Speaker 1: example of how not to do it I can think
Speaker 1: of is probably Cadbury from some years ago. They made
Speaker 1: three changes to their product and they've never recovered from
Speaker 1: that compromise position. They've their market sally has shrunk incredibly
Speaker 1: since then. And the opposite of how to do it,
Speaker 1: how to deal with increasing raw ingredient prices, is probably
Speaker 1: really nicely showcased by Whittakers who just in the last
Speaker 1: few months said, look, the cost of our raw ingredients
Speaker 1: is increasing. We don't want to sacrifice the quality of
Speaker 1: chocolate because we're really proud of it. Therefore we're really sorry,
Speaker 1: but we have to put up the price. And their
Speaker 1: price increase was pretty hefty. But I think they've just
Speaker 1: done a really textbog marketing job of being transparent, maintaining
Speaker 1: trust with consumers and explaining why they're doing it. So
Speaker 1: they could have hidden this, you know, instead of two
Speaker 1: hundred and fifty grams, maybe you only getting two hundred
Speaker 1: and twenty five grams, but people would have gotten onto
Speaker 1: this and in the age of social media, I think
Speaker 1: there is bound to be a backlash, particularly for a
Speaker 1: product that people buy for hedonic reasons, so for enjoyment.
Speaker 3: What did Cabri do?
Speaker 2: So?
Speaker 1: Petbury did three things. This is quite a few years
Speaker 1: ago now. So they changed the formulation of their products,
Speaker 1: so they went from vegetable oil to palm oil because
Speaker 1: that was cheaper. They changed the packaging and they also
Speaker 1: changed the sizing. And so they did three things in
Speaker 1: quick succession. And I think it was incredibly ill conceived.
Speaker 1: You can just see how it would have occurred somebody
Speaker 1: somewhere sitting in front of a spreadsheet, not really thinking
Speaker 1: about how people feel about chocolate and the emotional connection
Speaker 1: and all this sort of stuff, just going we need
Speaker 1: to make more money on this. And then they made
Speaker 1: these three changes in quick succession, and to put it loosely,
Speaker 1: they got absolutely hammered by the market and their market
Speaker 1: share just shrunk away, sizzled away, and Whittakers, you know,
Speaker 1: at the time, a relatively small New Zealand manufacturer of chocolate,
Speaker 1: was the sole benefittor pretty much of that disaster. And
Speaker 1: I don't think Cadbury is anywhere close to where they
Speaker 1: were back then in market share, so they're still suffering
Speaker 1: from those consequences.
Speaker 2: Could this be a temporary issue in some cases? I mean,
Speaker 2: could we see some products return to their original size
Speaker 2: given the backlash they receive, or have we not actually
Speaker 2: seen that yet?
Speaker 1: Like to be an optimist, and I would love to
Speaker 1: be able to say I think we will see those
Speaker 1: coming back, but I think the realist in me says
Speaker 1: there is no way that's going to happen. Just as
Speaker 1: prices generally never decrease, you know, after the global financial crisis,
Speaker 1: after the COVID pandemic, you know, they were short term
Speaker 1: increases in prices, but those prices never come down again.
Speaker 1: And I think we will see the same thing here.
Speaker 1: Unless there is a really robust consumer revolt and a
Speaker 1: basically boycotting of a particular brand of a particular product,
Speaker 1: then the manufacturer might say, well, actually, we've listened to consumers,
Speaker 1: which is what they should do in the first place,
Speaker 1: if they did good marketing, and we've gone back to
Speaker 1: the original quantity, we haven't compromised on the ingredients, and
Speaker 1: we will try to keep the old price for as
Speaker 1: long as we can. I think there is a very
Speaker 1: small chance that some selected brands might react to that
Speaker 1: if there is sufficient backlash from consumers, but by and large,
Speaker 1: I don't think we will see those prices or coming
Speaker 1: down all those quantities going back up again.
Speaker 2: What should we be on the lookout for at the supermarket?
Speaker 3: Supermarkets in New Zealand.
Speaker 2: Are already starting to show unit pricing right correck, So
Speaker 2: is that something that we need to take more notice of.
Speaker 1: There's a raft of suggestions that you know, research has
Speaker 1: shown work really well. So the first one is go
Speaker 1: shopping with a shopping list. Second one is go and
Speaker 1: have a look online to see where you can actually
Speaker 1: get the product for the least money. Because just something
Speaker 1: is on special somewhere doesn't mean that that's actually the
Speaker 1: lowest price. Certainly, stockpile products when they're available at a
Speaker 1: particularly low price, and that is particularly sensible for products
Speaker 1: that you may not consume more of just because we
Speaker 1: happened serve them at home. So an example would be,
Speaker 1: I don't know, dishwashing liquid or table salt or toilet paper.
Speaker 1: An example of where this could backfire would be products
Speaker 1: that we might consume more of when we have more
Speaker 1: of them at home, and the typical example for me
Speaker 1: would be chocolate, so buy more when the price is
Speaker 1: low and stockpile them. If you can, definitely go shopping
Speaker 1: with a shopping list, go and have a look on
Speaker 1: line at prices to save money, and you can save
Speaker 1: significant amounts. I mean, there's a lot of research that
Speaker 1: was published in the last twelve months here in New
Speaker 1: Zealand of how much variation there is in supermarket prices
Speaker 1: across an identical item over even just six weeks, and
Speaker 1: consumers can make huge amounts of saving that will easily
Speaker 1: outpace inflation. So it's actually a little bit of work,
Speaker 1: but it's quite easy to save money on groceries if
Speaker 1: you want to put your mind to it.
Speaker 2: Is there anything that could stop shrinkflation from happening because
Speaker 2: it's not a legal Is.
Speaker 1: It not illegal? Absolutely? Any manufacturer can do it, and
Speaker 1: you know it is in a way fair enough. If
Speaker 1: their prices go up for raw ingredients, then they need
Speaker 1: to somehow pass it on if they want to maintain
Speaker 1: their current profit levels. Certainly not illegal. What could stop it?
Speaker 1: I think the one thing I could think of is
Speaker 1: that generally brands are very quick in pointing out if
Speaker 1: something has improved, so they might have a little sticker
Speaker 1: on saying new improved recipe or new flame or something,
Speaker 1: and it's relatively cheap to do that. Maybe it could
Speaker 1: be manatorid legislation. Basically, if there is a longer term
Speaker 1: quantity change in the product, if the government were to
Speaker 1: regulate and say, look, you've got to actually notify people
Speaker 1: off this, just tell them that you're selling them ten
Speaker 1: percent less now, because as I said earlier, I think
Speaker 1: there is virtually no chance that consumers would discover this
Speaker 1: by themselves.
Speaker 3: You haven't met my dad, then I reckon he would
Speaker 3: clue on.
Speaker 2: But he's few and far between, isn't he the ones
Speaker 2: that actually sit down and go through the unit pricing
Speaker 2: and how much you get for your buck.
Speaker 5: This morning, the cookie monster has had enough. His beef
Speaker 5: with shrink flation is getting attention on Capitol Hill. After
Speaker 5: he posted quote me hate shrink flation, me cookies are
Speaker 5: getting smaller. Senator Shared Brown responded, me too, cookie monster.
Speaker 5: People in my state of Ohio are fed up. They
Speaker 5: should get all the cookie they pay for.
Speaker 2: In terms of the supermarket Commissioner, I know that that
Speaker 2: we when we speak about supermarkets, we're usually talking about
Speaker 2: price gouging and then not they're not being enough competition.
Speaker 2: Is this something that should really be perhaps on that
Speaker 2: commissioner's radar.
Speaker 1: I think it should be, and I would be surprised
Speaker 1: if it wasn't already on the grocery commissioner's radar, because
Speaker 1: it's a really rampant issue, I think, particularly in FMCGs
Speaker 1: and grocery retailing. I think, to be honest, it is
Speaker 1: misleading consumers because the chances of them discovering this. So
Speaker 1: if he had one thousand people going shopping and they
Speaker 1: buy fifty items each, and let's say twenty percent of
Speaker 1: those were somehow shrinking, I think very few consumers would
Speaker 1: detect all of that shrinkage. In fact, I would say
Speaker 1: nobody would detect all of that shrinkage. So it is
Speaker 1: misleading consumers because they assume, probably quite rightly, that the
Speaker 1: quantity they bought last week is still the quantity this week.
Speaker 1: But of course that's not That shrinkage is not being
Speaker 1: advertised manufacturers.
Speaker 2: And so would your main piece of advice to manufacturers
Speaker 2: just be open and honest, don't try and sneaky your
Speaker 2: way through it.
Speaker 1: Yeah, I think it depends on what sort of brand
Speaker 1: you have, And this is obviously where the power of
Speaker 1: marketing comes in. Woodeckers has a fantastic brand that is
Speaker 1: one of the most trusted brands in New Zealand, and
Speaker 1: so they can do this and this will further enhance
Speaker 1: their trust. Many of these other brands, they're global, multinational
Speaker 1: companies that are humongers in size, and people don't really
Speaker 1: know the brand. They certainly don't know the company, but
Speaker 1: they might know the brand. I think if the brand
Speaker 1: is suitable and has that sort of base, I think
Speaker 1: that could be one way forward to say, look, this
Speaker 1: is what we're doing, and you know, advertising these things
Speaker 1: via social media is relatively straightforward. I think in an
Speaker 1: age of increased consumer skepticism, it is really just good
Speaker 1: practice to be as transparent as one can be to
Speaker 1: avoid consumer backlash because, as we know from Cadbury, some
Speaker 1: brands just never recover again.
Speaker 3: And lastly, what are some examples that have really got
Speaker 3: your goat?
Speaker 1: This is a good question. So I don't go grocery
Speaker 1: shopping all too often, but I certainly have noticed that
Speaker 1: over the last couple of years, you know, cheeses have
Speaker 1: become available in all sorts of sizes, and so you
Speaker 1: think you're spending less, but actually really you're spending more.
Speaker 1: Because you're spending you're probably paying the same amount of
Speaker 1: money for, you know, a greatly reduced quantity of cheese.
Speaker 1: And what gets me there always is, you know, I
Speaker 1: can't get my head around how this is possible with
Speaker 1: one of the world's largest dairy manufacturers here in the country.
Speaker 1: So I always struggle with that in comparing it to
Speaker 1: prices that I know exists overseas, where you know, we
Speaker 1: can get cheeses for a lot less, And so I
Speaker 1: think if a product is a really high in price
Speaker 1: here and unreasonably so in my view, then I think
Speaker 1: gre inflation really irks me.
Speaker 3: Thanks for joining us, bodo my pleasure.
Speaker 2: That's it for this episode of The Front Page. You
Speaker 2: can read more about today's stories and extensive news coverage
Speaker 2: at enziherld dot co dot nz. The Front Page is
Speaker 2: produced by Ethan Seals. Patty Fox and Richard Martin are
Speaker 2: the sound engineers. I'm Chelsea Daniels. Subscribe to The Front
Speaker 2: Page on iHeartRadio or wherever you get your podcasts, and
Speaker 2: tune in tomorrow for another look behind the headlines.