‘Shrinkflation’ damages food brand reputations

By Noli Dinkovski

- Last updated on GMT

Clive Black: Shrinkflation shows a complete misunderstanding of how consumers connect with brands
Clive Black: Shrinkflation shows a complete misunderstanding of how consumers connect with brands

Related tags: Brand, Manufacturing, Austrian school

Shrinkflation is a “dangerous strategy” for manufacturers of branded products to embark upon, as it shows a complete misunderstanding of how consumers connect with brands, a leading food and drink analyst has argued.

While being an understandable response to input price inflation, shrinkflation – changing the physical size and or weight of a product, while keeping its price constant – assumed “the vast majority of the UK’s 65M consumers are blind​”, claimed Clive Black, head of food at stockbroker Shore Capital Group.

Black was addressing attendees at Food Manufacture’s Business Leaders’ Forum held in London last month. The morning event was sponsored by the host, legal firm DWF, and food waste reduction specialist Company Shop & Community Shop.

“Anyone who has bought a chocolate bar or a biscuit in the last two years will have noticed how much they have shrunk,”​ Black said.

‘How much they have shrunk’

And I guess that once inflation works though the system, we’ll have advertising companies talk about the new larger-sized products – but consumers will be alive to that as well.”

The current problems faced by manufacturers of branded products were indicative of the issues faced by the industry in the last decade, Black claimed.

After 2006, the oil price went up, there was a harvest failure, and Asia started to eat a lot more protein, he explained. This led to a structural change in food commodity prices around the world, Black added.

“What the UK manufacturing industry did was go on the promotional rampage, on the basis that they could sell more volume, while believing that shoppers wouldn’t get the fact that individual unit prices were going up,”​ Black explained.

‘Total lack of knowledge’

“So, while shrinkflation is an understandable economic rationale to input price inflation, it demonstrates a total lack of knowledge of what brands stand for – innovation and connectedness with customers.”

Black said it was “very noticeable”​ that the two big growth areas in the UK food market over the last two financial quarters had been premiumisation and own-label. Meanwhile, “proprietary brand participation​” was continuing to fall, he added.

Responding to Black’s comments, a leading food and drink consultant said that rather than seeing any significant growth in own-label, he was witnessing an increase in “small, entrepreneurial brands at the expense of the big boys who can’t innovate, or who have failed to innovate”.

“I think that is the real threat for the big branded food manufacturers – how do they capture that kind of innovation that consumers are desperate for, and the retailers are pushing?”

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