🔎 What’s Shrinkflation? + 🎧 Should I cancel my Spotify sub? + 💳 Credit Card Points

The money stuff that you wish they taught in school

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Your Questions & Answers

• 🔎 What’s Shrinkflation?

• 💳 Should I get a credit card for the points?

• 🎧 Should I cancel my Spotify sub?

🔎 What’s Shrinkflation?

Q. “I saw a TikTok where someone said something about ‘shrinkflation’. What’s that?“

-Kye, 16

Answer

Hey Kye, great question. So inflation is when the price of things rise over time. I wrote a bit of an explainer about it here that you can read if you’re interested.

Let’s do this with an example.

Say a Mars bar is worth $2. It weighs 50 grams. The company that makes Mars bars has to buy chocolate, pay for electricity (to run the factory), pay staff wages and pay for materials (for the packaging). The prices of all of those things has gone up lately.

That means that the company is making less money for every Mars bar it sells.

Raising Prices

So the company decides to raise the prices of its products to make back some of those new, higher costs.

It raises the price of Mars bars from $2 to $2.20. That’s a 10% increase.

Now, most of us won’t really notice the difference in price. But some of us might. And we might not buy Mars bars. Or we might buy fewer of them.

Shrinking Products

But there’s another way that the Mars bar maker can recover some of the new costs it is having to pay.

• It can shrink how much is in each Mars bar. Remember how we said that each bar weighed 50 grams?

• Well imagine that the company decides to keep the price at $2.

• What it’s going to do instead of raising prices is reduce the amount of choclate in each bar by 10%. That means that the bar now weighs 45 grams.

5 grams isn’t much. Barely anyone will notice that.

But the effect is the same. The company is getting back 10%. Instead of raising prices, it’s doing it by lowering how much it sells. And by doing that it is paying 10% less for some its costs (like chocolate and packaging).

So that’s shrinkflation. It’s the act of ‘shrinking’ how much is in a product while keeping the price the same. Companies do it to earn more money while spending less on costs. And it generally annoys people less than raising the price outright since barely anyone notices when their favourite sweet treat or salty snack gets a tiny bit smaller.

Hope that explains it for you! I’m off to buy a Mars bar…

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