We are sure you all have had this question on why Parle-G comes at the same price as before, well where the prices have remained constant, the quantity hasn't. It is possible because of Shrinkflation and many more companies, especially FMCG (Fast-moving consumer goods) ones. Let's see what is Shrinkflation in today's article.
Economic Definition and Our Explanation -
Shrinkflation is a rise in the general price level of goods per unit of weight or volume, brought about by a reduction in the weight or size of the item sold.
Simplifying it - You see this Shrinkflation is used to counter Inflation. The prices of goods are affected by many factors, such as the Price of Raw materials, Labor Costs, Fuel required for transportation, and many more. When these prices rise, companies have to raise the product prices in order to be profitable and sustain. But since it would affect their sales volume, they reduce their product size or change their packaging or even sometimes lower the quality of the product so as to use a lesser quantity of cost materials and in turn keep the prices the same.
Is This Bad or Unethical?
Not exactly, you see some products are important in many peoples lives, for eg. Parle-G, many low-income groups of people rely on it to feed themselves and if let's say tomorrow Parle decides to raise its prices from Rs. 5 to Rs. 10, they won't be able to afford it, and we are talking about people who are BPL (Below Poverty Line). So, yes, they don't get the same quantity as before but at least they are getting something. While reducing Quantity is acceptable, Quality isn't. In fact, it can have an adverse impact on people's health. Many experts argue that companies should be legally obliged to notify people when they use Shrinkflation.
Conclusion
While above we only saw Parle-G's example so as to keep it simple and understand the concept, there are numerous companies who have used this tool to avoid raising prices. As discussed above, While Reducing Quantity is acceptable; Reducing Quality isn't. Do you have some examples? let us know in the comments down below.
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Disclaimer - Above information is to spread financial literacy. We are not SEBI registered financial advisors, kindly consult your financial advisor before making any investment decision.
Source and More examples of Shrinkflation - https://en.wikipedia.org/wiki/Shrinkflation
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