+Solving Shrinkflation and Skimpflation
Nigeria’s inflation has been rising over the past few years, currently reaching 34.19 per cent, a surge of 11.40 percentage points compared to the 22.79 per cent recorded in June 2023.
As the inflation rate continues to soar, consumers are likely to encounter new challenges in their everyday purchases.
Two significant trends, shrinkflation and skimpflation, may emerge as companies adapt to rising costs. Shrinkflation, where product sizes decrease without a corresponding price reduction, and skimpflation, where the quality of products or services diminishes, might become increasingly prevalent across various industries.
According to the National Bureau of Statistics (NBS), as of June 2024, the headline inflation rate increased to 34.19 per cent.
This showed a notable increase in the average price level over the previous year, rising by 0.24 percentage points year over year from the 33.95 per cent recorded in May 2024 and by 11.40 percentage points from the 22.79 per cent recorded in June 2023.
To the British economist, Pippa Malmgren, who coined the term “shrinkflation,” it is a form of hidden inflation imposed on consumers by manufacturers.
The most typical products to experience shrinkflation are ordinary consumer goods, especially food and beverage items. Goods including bread, cereals, snacks, and dairies are frequently prone to shrinkflation.
Packing sizes for household products like detergents, toiletries, and cleaning supplies gradually get smaller over time.
Skimpflation, on the other hand, is common in certain consumer goods and services. For instance, while maintaining the same rates, hotels and restaurants in the hospitality sector may reduce the quality of their services or portions while keeping prices constant.
A news report in 2021 found that a pack of Coaster Biscuits originally contained seven pieces, but over time, the number of pieces decreased, with each piece growing thinner until the company ultimately decided that three pieces were sufficient for consumers, at the same price or higher.
This reduction was accompanied by a price increase. Initially, a pack of seven Coaster Biscuits was sold for N5 but was later sold that year for N10 a pack of three biscuits.
Despite fluctuations in Nigeria’s inflation rate during the 2021 period, the declines were not significant enough to alleviate the deteriorating economic conditions.
This example illustrates shrinkflation and an eventual increase in price.
An example of skimpflation is the change in ingredients by Tesco, a British multinational grocery retailer, which made changes to its products, cutting the meat content in its “Tex Mex” chicken enchiladas from 27% to 20%, and reducing the pork content in its Finest sausages from 97% to 90%.
Although shrinkflation and skimpflation are not officially tracked by the National Bureau of Statistics (NBS), the high inflation rate of 34.19% in June 2024 suggests that manufacturers are likely under pressure to control prices, often leading to these practices.
Some fast-moving consumer goods (FMCG) companies bowed out because of the inflationary pressure. Within one year, 11 major foreign companies have ceased full operations in Nigeria due to external price instability (exchange rate fluctuations), inflation, and other prevailing macroeconomic conditions.
As Nigeria grapples with persistent inflation, global inflation has also surged in recent times, putting consumers worldwide at risk of both shrinkflation and skimpflation. According to the 2023 Ipsos Global Inflation Monitor, nearly half (46%) of consumers across 33 surveyed countries reported noticing that product sizes are becoming smaller while prices remain the same.