By Mark Fairlie.
The Office of National Statistics has released a report showing that, out of 17,000 items for sale, 206 had shrunk in size while 79 had increased. The practice of keeping the price of the product the same but reducing it in size is referred to as “shrinkflation.” Bread and cereals, personal care products and appliance, and meat were the items most prone to shrinkflation.
Shrinkflation was in the news in late 2016 when Toblerone manufacturer Mondelez announced that it was shrinking the size of its signature triangular chocolate bar because of rising input costs (source: FT).
Brexit blamed but not to blame
The incidence of Toblerone shrinkflation occurred five months after the UK voted to leave the EU. The timing of the rise led some to speculate that it was the result of the referendum which prompted the change to the dimensions of the confectionary item. However, in an interview with the FT at the time, the company denied it, stating that the change was prompted by an increase in the value of the Swiss franc and not the fall in the value of sterling that occurred following the public vote.
In the same FT article, the ONS stated that Brexit was not the cause of shrinkflation, noting that there had been “no change in the frequency of size changes over this period, which included the EU referendum.”
However, Remain-supporting media outlets did not report on the ONS’s belief that Brexit was not the cause of shrinkflation. In an article entitled “Now chocolate bars are shrinking because of Brexit” in Bloomberg, no mention was made of the ONS’s statement nor was any supporting evidence offered by the publication contrary to the ONS’s opinion.
The Guardian, in its “Brexit, bites: more than 200 products subject to shrinkflation, says ONS” piece, also took a different view. It quoted Tim Rycroft, the chief operating officer of the Food and Drink Federation, who said that the falling value of sterling since the referendum result “added to…massive cost pressures.” It also referred to the number of Birds Eye fish fingers per packet being reduced from 12 to 10. The company said that “the cost of many of our raw materials have risen since the EU re
Speaking to BBC News, Sarah Coles, a personal finance analyst at stockbrokers Hargreaves Lansdown, noted that the cost of raw materials “dropped back…but the shrinkage continued.” She speculated that “manufacturers (may have) found a way to boost profits under the radar.”
The Freddo index
A Freddo is a frog-shaped chocolate bar manufactured and distributed by Cadbury’s. According to Calum Muirhead of Proactive Investors, the “Freddo Index” may be “the most important economic indicator you’ve never heard of.”
Rather than keep the price the same while reducing the size of the chocolate treat, the manufacturers have kept the size the same and raised prices over the year. UK consumer website Vouchercloud reports that a Freddo cost 10p in 2000 and that, had its price risen in line with inflation, it would now cost between 16 and 17p. Its actual price is 25p which demonstrated that the “one afflictions that Freddos seems to have avoided…is ‘shrinkflation’.”