Brands turn to shrinkflation as consumers’ purchasing power erodes
By Zion Rufus
As economic disruptions, inflationary pressures, and sustained increase in the general price level of goods and services continue to erode the purchasing power of consumers across the globe, consumers are raising concerns about the outrageous reduction and rationing in the product offerings of some popular Fast Moving Consumer Goods (FMCGs) brands.
Companies are reportedly turning to the old strategy of “shrinkflation”, a marketing tactic where consumers are keenly focused on the price of goods and less aware of the small changes to the size or volume and quality of products. When cost of production increases, companies tend to cut costs either by reducing quantity or quality of a product while maintaining the price, or maintaining the quality and quantity and inflating the price.
Daniel Aikhomogbe, a consumer, revealed to MARKETING EDGE that his decision to go grocery shopping had met unprecedented surprises as prices of some household supplies had skyrocketed. Naming notable brands such as Hollandia, Oxford Cabin Biscuits, and Quaker Oats, Aikhomogbe explained that not only did their contents reduce drastically, their prices are as well absurd.
He said: “I went shopping yesterday, for the first time this year. At home we prefer Hollandia Evap Milk and Oxford Biscuit, but to my shock, they have reduced the package size and the price is high. I can’t even put into words how I felt after handling the Hollandia, it was as though the manufacturers were too scared to put anything inside, it was nearly empty and the price was about 50% higher. The content in Hollandia is nothing to write home about, I tell you. Quaker Oats has also reduced their content.”
Deborah Olaiya shared that she has seen package downsizing in brands such as Gala Sausage Roll, and Indomie.
“We love Indomie Noodles. In fact, I think Nigeria is obsessed with the brand. But daily, it’s like they are slowly creeping up on us with the price increments. One day you are buying 70g for N60, next day you are buying for N80; the following week, the store owner tells you it’s now N120. Meanwhile, what Gala used to sell for N50 has transformed to N100, even though they are now selling an unbelievably smaller size for N50. Can we be considered too?”
Ogunnowo Afolabi said: “I wish I can have a one-on-one with the makers of 5alive Pulpy. A lot of people love that drink, but most have stopped buying it since it turned N500, even N550 in some stores and a bit watery, unlike how it used to be concentrated. The drink used to be N300. Sunlight detergent used to be N100, but now the same Kg is sold for N170. Sachet pure water went from N5 to N10, and now it is N20. For whatever reason, this is a crime against humanity.”
Elijah Oyekan said: “Peak Milk refill and Nasco Cornflakes is like buying 50% content and 50% air. It’s plain wrong. You feel the bag, it feels full, you open it, it’s all air and little content.”
Shedding light on the current situation during an interview with MARKETING EDGE, Dr. Fred Mafikuyomi, Group Managing Director of Unicorn Holdings Limited, a medium sized conglomerate headquartered in Lagos said: “It happens all the time. Where some companies will outrightly increase the price of goods, others will reduce the volume or value of the products. A lot of that is currently going on in the market. These are some of the price mechanisms used by manufacturers to remain in business.”
Mafikuyomi continued: “There is no doubt that there is general inflation in the world, that food prices have gone up astronomically, and that prices of essentials especially in the FMCG sector, have gone up so much. The reason is not far-fetched; prices are rising due to an increase in the cost of production such as raw materials and wages.”
In Nigeria, inflation rate shot up to 15.92% in March of 2022, the highest price hike since October 2021, with prices of most commodities soaring. Cost of food increased 17.20%; prices of imported food rose 17.56 percent year-on-year in March, accelerating from a 17.48 percent advance in February, according to data shared by the National Bureau of Statistics (NBS), Nigeria.
According to the business titan, companies are also grappling with these rapidly rising costs that are passed on to their customers as content and sizes of packaged products like cereals, beef rolls, beverages, noodles, pasta, powdered products, and more have been manipulated and reduced.
“Let’s talk about Wheat for instance. It is said that Russia and Ukraine together provide more than a quarter of the world’s wheat, and the derivatives of wheat are numerous, including durum and semolina. What’s more, among other products, they are also the key suppliers of barley, sunflower seed oil and corn. So, imagine if these two countries stop producing and/or exporting Wheat, that disruption alone could fuel higher food prices,” Mafikuyomi noted.
He further explained that the uptick in fuel prices, their ripple effects on transport and logistics costs, and spillovers from global wheat shortages as a result of the ongoing Russia-Ukraine crisis are some of the biggest factors impacting domestic prices.
“This isn’t limited to the Nigerian market, it’s happening across the globe. We all know that in Nigeria, diesel and gas are used for the standby power generating sets that we use in manufacturing. You can imagine the rate at which diesel went up from N250 to N300, then 700/800, before coming back to settle at 650. And a recent NBS report revealed that the price of cooking gas has increased by 83 percent; the cost of power has gone up, PHCN keeps increasing electricity tariffs. Salaries must increase so as to appreciate the staff; at the end of the day it affects the general cost of manufacturing or production.
“So the manufacturer will have to input these additional costs somewhere in their final products; it will go to the unit price of each product, because the pricing has to be distributed, to the volume of product that you produce. Government taxes too are there, from the federal government, state government, local government, various kinds of levies, even on logistics,” the Unicorn Holdings explained.
In an earlier research carried out by MARKETING EDGE across Twitter, Instagram, and WhatsApp on factors which currently influence the purchase decisions of customers, the results revealed that customers are beginning to ditch brand preference and loyalty to buying from brands that offered fair prices. However, the result also showed that the influence of price on purchase decision process is product specific.
On Twitter, a user, Chijioke Ochubili said: “I stopped buying Fox cookies the moment it hit N1000. Might consider doing the same with Maryland cookies too.”
Another Twitter user, Kenechukwu Anthony tweeted: “It’s hollandia yoghurt for me, I asked 2days back and they told me N1200, I just told the lady not to worry, and asked for Cway instead.”
@nekie_neka said: “I was just saying that I’ve stopped buying Vita Milk. The thing used to be N200, now it’s N700.”
@Nathan shared: “A tin of Three Crowns Milk now costs N300. I was shocked. I had to go to another store to by a satchet of Peak Milk.”
RECOMMENDED ARTICLES
Comment
No comments found.