For those wondering if it's truly representative, it's estimated that 50% of the inflation in Europe is due to margin increase not bc of the inflation itself.
This argument is completely incoherent. You can't study the cause of inflation by looking at the distributional effects of inflation.
For example, in 2020 there was a huge increase in demand for used cars, and the price of used cars increased by ~40% within a few months. But people who sold used cars did not have their costs increase - they were, after all, selling an already completed product. The IMF would therefore estimate that between 2019 and 2020, ~100% of inflation in used car prices was due to margin increases rather than inflation itself.
This is obviously silly - the increase in prices was because there were too many buyers and too few cars, not because the owners of used cars suddenly because significantly more greedy overnight. It's the same with corporate profits. Inflation has distributional effects which are interesting to study, but we shouldn't confuse ourselves by claiming that the effects are actually the causes.
Do not buy into that narrative. This inflationary process has been mostly driven by monetary policy. Margin increases are the result of businesses trying to navigate an inflationary period. These margin increases are not resulting in increased profits across the board (there are some notable exceptions). For example, Carrefour's profits in 2022 were about the same as in 2019. [1]
From the article you linked: "Profits (adjusted for inflation) were about 1 percent above their pre-pandemic level in the first quarter of this year."
Supply constraints typically lead to higher prices and higher margins. The fact that the margins have gone up does not somehow imply that the higher prices are something other than inflation.
> it's estimated that 50% of the inflation in Europe is due to margin
Is this just constant margins being spun as conspiracy?
Say I have a 10% margin on a $100 product. Costs rise 10%, i.e. to $99. If I want to keep a 10% margin, I raise prices to $110. How much of that price rise was inflation versus margin increase? Will someone now claim that 90% of cost rises were due to inflation and 10% margin? (Keep in mind, too, that inflation is forward looking.)
Put another way, how enviable have manufacturers’ margins in Argentina, Turkey or Zimbabwe been?
This is such a good idea. I know that everyone in the Western World is told that they eat too much but people need to be able to buy food and eat it. And if the same packaging this week has 90% of what it had last week then then consumers are going to suffer.
In the UK many people rely on Food banks and parents skip meals to feed their children. Cutting the amount of food in a package in a manner that is not even visible without carefully examination is a morally dubious practice.
Corporate profits are high. This is one of the reasons why.
I wish there was legislation in place that sets legal standard sizes; for one, it would allow for more uniform packaging, allowing reuse between brands and reducing trash. It would be more predictable box / pallet sizes, reducing transport costs. And it would give consumers more security, even with the mandatory price per liter / kilo notices which are often hard to read.
One example of shrinkflation / cost fuckery here is cheese. We buy a kilo of it every time, but they've changed it so you get e.g. 920 grams. Looks the same size, but it's slightly different, thus hard to make comparisons. Still up 30% since before the Ukraine thing though.
Well, you can (and should!) check the (mandatory) price/mass or price/volume, but of course there are very smart people being paid a lot to design the packaging so that it's sufficiently compelling for you to still put a higher value on the product...
This is a cynical move because, as the article mentions right at the top, this is just to apply pressure on suppliers before contracts renegotiations. Tesco in the Uk does not sort of stunt as well and for the same reasons.
> In the UK many people rely on Food banks and parents skip meals to feed their children.
The worse combo is shrinkflation with significantly increased price. I used to buy Arm and Hammer detergent (250 FL OZ) from Costco for ~$11 about a year ago. Last week, I went to Costco and saw that they have reduced the size of the container (in a very subtle way so it is hard to notice) with 200 FL OZ and charges $14.89. That is like double rip-off.
My salary did not increase 35% between this and last year. For Church & Dwight (Arm and Hammer brand manufacturer) to not only increase the price by at least 35% with shrinkflation, I wonder where the extra profit are going toward.
When I just immigrated 20 years ago, I used to be in awe at the size of commodities and food portions in the US. Nowadays, things are shrinking noticeably and eventually, stuff bought in the US would look just the same in terms of size as what's available in Burma (Myanmar), which is my home country. That observation makes me feel like the US (and probably all of the affluent western nations) is approaching the end of the era of abundance, and life for the future generation would be tougher. Pretty sad/concerning to think about it.
It’s incredible to me that MBAs are still able to pitch “what if we made the product deceptively smaller but charged the same price?”, and don’t get thrown out a window. As if that’s a novel sustainable long-term strategy in CPG.
A brand of laundry detergent I use recently decreased the size of its 36oz bottle to 28oz. The kicker, however, is the approximate number of loads listed on the bottle changed from 27… to 28. The instructions on the back now recommend filling the cap to a lower bar for “medium” loads.
I’ve been meaning to write to the manufacturer to ask if they’ve quietly changed their formulation to something more concentrated, though I have a pretty good idea of the canned response I'd receive.
This is great, shrinkflation is one of these disgusting practices that play on the human psyche to trick people.
But also carrefour (and large retailers like them) are notorious for abusing their power when buying, and are a large part of the systemic problem. I don't know how much this is negotiating technique.
I watched a documentary on this a few weeks ago. In France, there's 2 big groups which control outsized % of whole market. They squeeze producers really hard.
They have a lot of abusive rules in contracts which are unrealistic. Like, you must deliver your stuff to market X precisely at 2AM, not before not after, and for every minute of delay you pay a large fine. Now, when trying to deliver to N markets during same night, there's always delays in some of the places because the recipients in market Z are slow - fines are on the producers.
All the extra promos etc in supermarkets (buy 2 get 3) are funded by the producers as well.
I don't know anything about them as a corporate citizen, but out of the (many) supermarket chains here in France I like them the best. They are not the cheapest, but the quality/price ratio is usually correct and the store branded items are very good.
There's a general push in supermarkets to move consumers towards own-brand goods as the profit margin is higher. It wouldn't surprise me if this was a marketing tactic to push people in this direction.
We need laws to require special labelling with the price per net pound or price per net kiloggram clearly shown, and the previous price. Something like:
My pet peeve is that price per round measurement unit (eg kilogram) is in tiny writing compared to product cost, even though they are arguably equally important. Given that the former is mandated, they should also mandate that they appear in equal size fonts on price labels.
While the trend they're highlighting is absolutely real, it looks like the math in their first example isn't quite right:
> For example, Carrefour said a bottle of sugar-free peach-flavored Lipton Ice Tea, produced by PepsiCo, shrank to 1.25 liters (0.33 gallons) from 1.5 liters (0.3 gallons), resulting in a 40% effective increase in the price per liter.
Assuming the price per unit stayed the same (which is the implication), this is a 20% effective increase, not 40%.
I don’t know what the correct term is in English but in my country, “comparative pricing” is mandatory, so when you’re buying coffee for example there’s a secondary price listed that tells you what the cost is per kilogram or whatever other unit makes sense.
For me this already solves the problem, because what I really care about isn’t whether I get 500g or 400g of coffee, I care about the real price compared to the other options on the shelf.
This needs to be regulated properly in the US, because the stores constantly mess with the units for similar items, making it much more difficult to compare at a glance. You'll see a random assortment of measurements for the same product, for example my favorite is shopping for toilet paper and paper towels. You'll see everything from /sheet, /roll, and the best when they just consider the package an entire 'unit'...
You do miss though, those situations where every supplier took advantage of inflation to stack extra margin on. Seeing that diff to the last price is helpful.
In France near every price also small LCD display that show price for kilogram or liter. Which also help to fight with companies that like to create idiotic packages.
Yes and it is always worth paying attention to as often items on some kind of offer and so advertised within the store may not be the best value possible for the item.
Toilet rolls are a great example. Sometimes you see the 24 pack "on sale" or "buy one get one half price" yet the cost per roll (unit) is higher than if you were to buy a 16 pack. Yes you would have less overall toilet rolls and that may be an issue for you but you are paying less per toilet roll.
Laundry detergent is another common one. Look at the price per litre of the item "on sale" and compare it to the not on sale sizes/packs as well.
People generally/instinctively expect/feel that if you buy the bigger pack you get a better deal and the companies certainly make you feel that is true but you have to pay attention as more often than not the best deal isn't the deal they're promoting.
I would have appreciated if the article would have included information about where the profits from these changes are going.
Without that information, the other plausible narrative is more like, "Governments try to cover up the negative consequences to consumers of their massive inflation of the monetary supply by forcing companies to continue providing products at the same price (especially products like food staples that are included in consumer price indices)."
In all likelihood, it's probably both the government officials and the execs/owners who are profiting off the situation at the expense of everybody who still needs to eat food.
We have the same problem in Sweden with retailers blaming supermarket chains and supermarket chains blaming retailers. In reality they are probably both screwing the consumers. Then they have the gall to say "if you don't like it shop in a different store" when the prices are going up in every store because of (easily obfuscated) price collusion between supermarket chains. Consumers doesn't read the papers in which the chains brag about their "record profits" to their shareholders and even when they do most are unable to connect the dots.
it's funny, i was thinking about this last year. "is there a technology solution that would arm shoppers with better knowledge so that the market may reward participants based on their good behavior with respect to inflation?"
i was thinking things like leaderboards, smartphone apps and big databases. "let the retailer slap a sticker on it to build customer loyalty" is the simple and elegant solution i missed.
An interesting tidbit of information is that a number of products (butter, flour, milk, sugar,...) used to be sold in standardized weights and volumes (1kg, 500g, etc.).
It got repealed in the 80s under pressure from manufacturing AND commercial lobbys.
It seems somewhat out of linguistic character for them to use the English-"shrink"-based portmanteau, but hopefully there's a universal commonality (especially coupled with the hashtag format) that makes this move more effective.
I think French people, especially younger ones, are much more open to the use of English than stereotypes suggest. My favorite example is the French name for the movie "The Hangover", which is "Very Bad Trip". Not "Very Bad Trip" translated into French, but the exact English.
This phenomenon generally cracks me up, where you see random (to me) english phrases sprinkled throughout foreign languages. SNL leaned into this, in a skit with Pedro Pascal speaking spanish.
The -tion ending is theirs anyway, and they love certain types of English words.
They especially love -ing endings and will stick them on when it wouldn’t make sense in English. Ever notice the French for shampoo on also-sold-in-Canada shampoo bottles in the US? Shampooing. As a noun. And that’s not some Quebecois thing, it’s French French. Maybe they also like the “sh-“, and that made “shrinkflation” appealing.
They also use “parking”. “Le parking”. As in parking lot. Again, as a noun.
[edit] Shampooing is said “sham-pwan”, more or less, hitting the “n” rather softly, but parking is spoken almost the same as in English.
[+] [-] h1fra|2 years ago|reply
https://www.imf.org/en/Blogs/Articles/2023/06/26/europes-inf...
[+] [-] enoch_r|2 years ago|reply
For example, in 2020 there was a huge increase in demand for used cars, and the price of used cars increased by ~40% within a few months. But people who sold used cars did not have their costs increase - they were, after all, selling an already completed product. The IMF would therefore estimate that between 2019 and 2020, ~100% of inflation in used car prices was due to margin increases rather than inflation itself.
This is obviously silly - the increase in prices was because there were too many buyers and too few cars, not because the owners of used cars suddenly because significantly more greedy overnight. It's the same with corporate profits. Inflation has distributional effects which are interesting to study, but we shouldn't confuse ourselves by claiming that the effects are actually the causes.
[+] [-] josu|2 years ago|reply
From the article you linked: "Profits (adjusted for inflation) were about 1 percent above their pre-pandemic level in the first quarter of this year."
[1] https://finance.yahoo.com/quote/CA.PA/financials?p=CA.PA
[+] [-] NickM|2 years ago|reply
[+] [-] JumpCrisscross|2 years ago|reply
Is this just constant margins being spun as conspiracy?
Say I have a 10% margin on a $100 product. Costs rise 10%, i.e. to $99. If I want to keep a 10% margin, I raise prices to $110. How much of that price rise was inflation versus margin increase? Will someone now claim that 90% of cost rises were due to inflation and 10% margin? (Keep in mind, too, that inflation is forward looking.)
Put another way, how enviable have manufacturers’ margins in Argentina, Turkey or Zimbabwe been?
[+] [-] badcppdev|2 years ago|reply
In the UK many people rely on Food banks and parents skip meals to feed their children. Cutting the amount of food in a package in a manner that is not even visible without carefully examination is a morally dubious practice.
Corporate profits are high. This is one of the reasons why.
[+] [-] Cthulhu_|2 years ago|reply
One example of shrinkflation / cost fuckery here is cheese. We buy a kilo of it every time, but they've changed it so you get e.g. 920 grams. Looks the same size, but it's slightly different, thus hard to make comparisons. Still up 30% since before the Ukraine thing though.
[+] [-] WalterBright|2 years ago|reply
Inflation increases profits, too (but not in real dollars).
> This is one of the reasons why.
The reason why is inflation.
[+] [-] BlueTemplar|2 years ago|reply
[+] [-] mytailorisrich|2 years ago|reply
> In the UK many people rely on Food banks and parents skip meals to feed their children.
A small minority, not 'many'...
[+] [-] programmertote|2 years ago|reply
My salary did not increase 35% between this and last year. For Church & Dwight (Arm and Hammer brand manufacturer) to not only increase the price by at least 35% with shrinkflation, I wonder where the extra profit are going toward.
When I just immigrated 20 years ago, I used to be in awe at the size of commodities and food portions in the US. Nowadays, things are shrinking noticeably and eventually, stuff bought in the US would look just the same in terms of size as what's available in Burma (Myanmar), which is my home country. That observation makes me feel like the US (and probably all of the affluent western nations) is approaching the end of the era of abundance, and life for the future generation would be tougher. Pretty sad/concerning to think about it.
[+] [-] transcriptase|2 years ago|reply
[+] [-] mortenjorck|2 years ago|reply
I’ve been meaning to write to the manufacturer to ask if they’ve quietly changed their formulation to something more concentrated, though I have a pretty good idea of the canned response I'd receive.
[+] [-] charles_f|2 years ago|reply
But also carrefour (and large retailers like them) are notorious for abusing their power when buying, and are a large part of the systemic problem. I don't know how much this is negotiating technique.
[+] [-] jakub_g|2 years ago|reply
They have a lot of abusive rules in contracts which are unrealistic. Like, you must deliver your stuff to market X precisely at 2AM, not before not after, and for every minute of delay you pay a large fine. Now, when trying to deliver to N markets during same night, there's always delays in some of the places because the recipients in market Z are slow - fines are on the producers.
All the extra promos etc in supermarkets (buy 2 get 3) are funded by the producers as well.
[+] [-] krisoft|2 years ago|reply
100%. What else would it be?
[+] [-] gniv|2 years ago|reply
[+] [-] robjan|2 years ago|reply
[+] [-] waihtis|2 years ago|reply
[+] [-] coldtea|2 years ago|reply
[+] [-] dkjaudyeqooe|2 years ago|reply
[+] [-] gnicholas|2 years ago|reply
[+] [-] edouard-harris|2 years ago|reply
> For example, Carrefour said a bottle of sugar-free peach-flavored Lipton Ice Tea, produced by PepsiCo, shrank to 1.25 liters (0.33 gallons) from 1.5 liters (0.3 gallons), resulting in a 40% effective increase in the price per liter.
Assuming the price per unit stayed the same (which is the implication), this is a 20% effective increase, not 40%.
[+] [-] marsokod|2 years ago|reply
In addition to the volume reduction, the price also went up from 1.45€ to 1.63€.
So the price per litre went from 0.97€/L to 1.36€/L. Much closer to the 40% figure.
[+] [-] huhtenberg|2 years ago|reply
[+] [-] gloria_mundi|2 years ago|reply
[+] [-] unknown|2 years ago|reply
[deleted]
[+] [-] extasia|2 years ago|reply
[+] [-] hnarn|2 years ago|reply
For me this already solves the problem, because what I really care about isn’t whether I get 500g or 400g of coffee, I care about the real price compared to the other options on the shelf.
[+] [-] Onawa|2 years ago|reply
[+] [-] tyingq|2 years ago|reply
[+] [-] xenator|2 years ago|reply
[+] [-] satysin|2 years ago|reply
Toilet rolls are a great example. Sometimes you see the 24 pack "on sale" or "buy one get one half price" yet the cost per roll (unit) is higher than if you were to buy a 16 pack. Yes you would have less overall toilet rolls and that may be an issue for you but you are paying less per toilet roll.
Laundry detergent is another common one. Look at the price per litre of the item "on sale" and compare it to the not on sale sizes/packs as well.
People generally/instinctively expect/feel that if you buy the bigger pack you get a better deal and the companies certainly make you feel that is true but you have to pay attention as more often than not the best deal isn't the deal they're promoting.
[+] [-] Iulioh|2 years ago|reply
[+] [-] developer93|2 years ago|reply
[+] [-] smeej|2 years ago|reply
Without that information, the other plausible narrative is more like, "Governments try to cover up the negative consequences to consumers of their massive inflation of the monetary supply by forcing companies to continue providing products at the same price (especially products like food staples that are included in consumer price indices)."
In all likelihood, it's probably both the government officials and the execs/owners who are profiting off the situation at the expense of everybody who still needs to eat food.
[+] [-] claviola|2 years ago|reply
Examples: https://i0.wp.com/sfnoticias.com.br/wp-content/uploads/2022/...
[+] [-] WirelessGigabit|2 years ago|reply
[+] [-] bjourne|2 years ago|reply
[+] [-] a-dub|2 years ago|reply
i was thinking things like leaderboards, smartphone apps and big databases. "let the retailer slap a sticker on it to build customer loyalty" is the simple and elegant solution i missed.
[+] [-] pkaye|2 years ago|reply
> Consumer groups say “shrinkflation” is a widespread practice, which supermarkets like Carrefour are also guilty of in their private label products.
[+] [-] lm28469|2 years ago|reply
[+] [-] BrandoElFollito|2 years ago|reply
[+] [-] kirykl|2 years ago|reply
[+] [-] charles_f|2 years ago|reply
It got repealed in the 80s under pressure from manufacturing AND commercial lobbys.
[+] [-] BugsJustFindMe|2 years ago|reply
[+] [-] kfoley|2 years ago|reply
[+] [-] jjgreen|2 years ago|reply
[+] [-] tech-historian|2 years ago|reply
https://www.youtube.com/watch?v=HkmlfHi9Ll4
[+] [-] hotnfresh|2 years ago|reply
They especially love -ing endings and will stick them on when it wouldn’t make sense in English. Ever notice the French for shampoo on also-sold-in-Canada shampoo bottles in the US? Shampooing. As a noun. And that’s not some Quebecois thing, it’s French French. Maybe they also like the “sh-“, and that made “shrinkflation” appealing.
They also use “parking”. “Le parking”. As in parking lot. Again, as a noun.
[edit] Shampooing is said “sham-pwan”, more or less, hitting the “n” rather softly, but parking is spoken almost the same as in English.