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Shrinkflation

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March 06, 2022

Shrinkflation

As the effects of the COVID-19 pandemic continue, you certainly have noticed an increase in the cost of a lot of goods and services. Inflation is a topic on every media channel as it continues to rise. In fact, according to US Bureau of Labor Statistics (BLS), inflation surged by 7.5% between January 2021 and January 2022. This was the largest increase of over a 12-month period since 1982!1 Thanks to inflation, ingredients and labor costs are now more expensive and thus higher prices are easily noticeable at grocery stores, gas pumps, home improvement services, etc. If companies cannot cut costs, they must resort to raising prices OR make their products/portions smaller. Enter Shrinkflation.

The practice of shrinkflation is where a company reduces the size of a packaged good but sells it for close to the same price. So, while the price may not increase much, consumers are likely not getting the same amount of a product as in the past. By practicing shrinkflation, companies can avoid an easily noticeable price hike. For example, what if your favorite item was $3.50 per unit and it suddenly increases noticeably to $5 per unit? It is likely you would begin searching for alternative brands or cease buying it altogether. But what if the price remained close to $3.50 per unit, but you received 10-20% less? Look at a few examples: Kirkland brand paper towels at Costco was 96.2 sq. ft., but now at 85 sq. ft. A six-count nugget pack Chick-fil-A is now a five-count nugget pack. Ivory dish soap is now 24 oz. instead of 30 oz. Your favorite cereal may have received a bigger box, but less contents inside for consumption.

You can deal with shrinkflation by paying closer attention to the everyday items you buy and their price per unit instead of the overall price. If your favorite item is the same price as the store brand, but the store brand gives you a little extra to enjoy, then that might be the better buy. Consider becoming even more judicious about waiting for sales. If you are now getting fewer items for your money, you may want to wait until they are available for less at your local grocery store. Lastly, consider buying staple items in bulk. The price may be a lot less per ounce or unit than when they are purchased in smaller batches. A word of caution when purchasing in bulk: don't buy so much that you are unable to use it all prior to expiration, as you may end up throwing away your savings.

SOURCE:

1 https://www.bls.gov/news.release/pdf/cpi.pdf

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About the author

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Eric Pucciarelli

Vice President, Private CFO®

Eric Pucciarelli, MBA, CRPC
Vice President, Private CFO™

Eric is a native of Atlanta, he graduated from Georgia Southern University with a bachelor's degree in Business Management and a Master's of Business Administration.

Eric's credentials include:

  • Series 7 (General Securities Representative);
  • Series 66 (Uniformed Combined State La;
  • Masters of Business Administration;
  • Chartered Retirement Planning Counselor;
  • Past board member of the Georgia Southern Alumni Association.

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The opinions expressed in this commentary are those of the author and may not necessarily reflect those held by Kestra Investment Services, LLC or Kestra Advisory Services, LLC. This is for general information only and is not intended to provide specific investment advice or recommendations for any individual. It is suggested that you consult your financial professional, attorney, or tax advisor with regard to your individual situation.

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Securities offered through Kestra Investment Services, LLC (Kestra IS), member FINRA/SIPC. Investment advisory services offered through Kestra Advisory Services, LLC (Kestra AS), an affiliate of Kestra IS. oXYGen Financial is not affiliated with Kestra IS or Kestra AS. Kestra IS and Kestra AS do not provide tax or legal advice. https://Bit.ly/KF-Disclosures

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