Listening to the news the other day, during the business section, the talk of inflation was the main topic for the segment. Interestingly enough, the segment focused on inflation during the pandemic. The cost of goods has increased by orders of magnitude. For example, eggs up 16.1 percent, beef 20% and most notably 3/4-inch plywood since March 2020, claiming that there has been a "252% price increase on one of the most used pieces of common lumber for construction." source.
Due to the pandemic and natural inflation rate, items are getting more expensive and faster than society can make up the cost through raises at work. This leads to the problem of affordability. How can an organization provide for their family when everything around us is going up in price but not our salary. How do families or first-time homebuyers get into the market when prices sore to new highs consistently.
One way to offset the cost is to invest in the Stock Market, specifically through Indexes or Exchange Traded Funds, which historically have gone up in value. The idea is over time, and your money provides you with passive income, AKA a strategy that is all so popular in the r/FIRE community on Reddit. For example, look at the returns of the S&P 500 chart below:
S&P 500 Growth Chart
I will draft another article on Financial Independence but getting back to the point of
this article, the term "Shrink Inflation."
- What does the term mean?
- Who is using this strategy, and do consumers, as you and I, notice it?
Shrink Inflation refers to manufacturers that package more miniature goods per unit; however, they charge consumers the same price as before the goods are removed. Think of Oreo's, for example. Oreo's have removed approximately 13.3% of cookies from their packaging. Once bolstering 45 cookies per pack, now only contain 39 in a package. This is a deliberately slow process. Their Shrink Inflation strategy is to remove items that most consumers hardly notice slowly. Chips are another example, we all see the amount of air in the bag, but gradually the chips are being removed while charging customers the same price. This occurs as inflation rises and the cost of goods increases. They can either pass the increased expense to the customer or remove items over time, recouping costs. I can see the mixture of both tactics to receive more income.
On a personal note, I honestly never noticed the difference of fewer items in a package until I heard about the term and a few google searches later. But now that I am aware of it, numerous brands come to mind. I can't see this tactic going away anytime soon or if at all. As consumers, we have the right to know and, at the very least, should be able to make a conscious decision as to which brands to support. I find this sneaky, but I understand the position of the manufacturer. What do you think about it? Is it acceptable, and if not, what would make it fair?