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.
LMAO no. It's foolish to equate an individual selling a single asset like a car with businesses that can range from little niche supply workshops up to dominating whole industries. Pure laws of supply and demand only hold true under conditions of perfect competition, and much of what we call 'business' is about playing the meta-game - out maneuvering competitors financially, creating moats and other barriers to entry to keep competitors out of a market sector, using marketing to maximize product differentiation and shape consumer perception, leveraging regulatory complexity in one's favor or lobbying for it to be reduced in order to gain some cost advantage.
Real world markets are a lot more complex than the little toy ones used to explain fundamental economic concepts.
My claim is that we can't determine what caused a price change by looking at the distributional effects of that price change.
I demonstrated this with an example, where we know what caused a price change (supply chain issues for a substitute product plus increased demand) and know the distributional effect (higher margins for sellers of used cars). If we naively try to explain the price change based on the distributional effect, we would claim that higher prices were purely caused by increased greed. We know this to be false.
Look, perhaps companies really did become more greedy in 2020 and that's what has really caused inflation. Or maybe large amounts of stimulus caused increased demand. Or perhaps the war in Ukraine has caused supply chain issues which drives up prices. My point is that looking at the distributional effects of inflation is just completely disconnected from the question of what caused inflation in the first place.
At the very least, if you're claiming that we can figure out what caused inflation by looking at the distributional effects, can you provide some evidence, or some argument, to support that claim? Because I think my example demonstrates that common sense ("X benefitted from inflation, therefore X caused inflation") is not a good guide here, and if anything, the additional complexity of real markets works against you here - if we can't even explain inflation based on distributional effects in a toy market, what makes you so confident we can do so in the market as a whole?
For some goods (like cars) supply issues have indeed been the major driver of price inflation.
But for many consumer goods, manufacturers have exploited the perception of inflation to increase prices or (as highlighted in the source article) to shrink package volumes while retaining the same price point. It's much less clear that supply is the driver here; bear in mind the fact that moving to smaller package sizes often imposes considerable overhead as whole production lines need to be retooled, new package containers designed and manufactured etc. It's not a passive response to market phenomena, it's a straightforward investment in the idea of giving consumers less value for their money.
While I don't disagree that government policy and economic shocks can often be inflationary without any intention on the part of the business community to drive prices up, consider too that sometimes there is such intent and organizations like the Chamber of Commerce exist largely to beg for support from the public purse in hard times and deflect criticism onto whatever scapegoats are convenient in good times.
That's not necessarily true, over the last few years we saw that companies were able to begin pushing prices to increase margins and profits on the same volume of goods instead of manufacturing more goods and making the profit on volume. Some of the margin increase was due to real supply constraints, but not all of it. For instance, when Coke and Pepsi lost ~4% of their global sales by abandoning the Russian market, they just raised prices everywhere else to compensate, because they could, and people were willing to pay. Now moving forward, they seem to be losing their ability to push prices. My point is not all cost increases were due to real constraints - they were in the auto sector, but that's not true of all sectors.
If I know this, I suspect the IMF does too, and incorporated that into the report.
> 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.
No it’s literally greed. You can choose to not raise the price of your used car when you sell it. “Market price” is a hallucination that you can ignore. You’re not forced to go along with it. As you said, sellers of used cars didn’t have their cost increase, so what was the forcing function for price increases except greed?
> “Market price” is a hallucination that you can ignore. You’re not forced to go along with it.
It's a powerful signal containing important information! You don't have to go along with it, but it may be beneficial to others if you do.
As an example, we bought a new car in 2019. We were planning to sell our old car but every time we were about to sell it, it came in handy - family came to town and we needed two cars, or it was nice to be able to go two places at once.
In 2020, prices shot up. Suddenly, it was worth it to sell the car.
Someone who valued it more than us got to use the vehicle. Was that greed?
> Someone who valued it more than us got to use the vehicle. Was that greed?
You sold it because you could get more money for it. That’s what greed is - you chose more money. You could make the case that you weren’t behaving immorally -not everything in life has to be a charity- but you acted out of a selfish desire for more money.
I’d also argue that “value it more” is pretty flimsy. Yes in a shortage the buyer clearly needed a car and was willing to spend more to acquire it instead of waiting for prices to drop. But you clearly didn’t value it beyond the 2019 price based on your stated desire to sell then, it was just an inconvenient transaction.
No, what you're describing has nothing to do with greed. Self-interest is not the same as greed. There would be nothing between greed and charity using according to your definition. Indeed, keeping the car when they didn't need it would also be greed. The only in-between is selling it for a fair value - but there is no objective fair price.
> > Someone who valued it more than us got to use the vehicle. Was that greed?
>
> You sold it because you could get more money for it. That’s what greed is - you chose more money.
If "following market price signals to decide what to produce and sell" is greed, then EVERYTHING is greed.
You make clothes on Etsy, and suddenly people will pay more for silver clothes because Beyonce tells her fans to wear silver. So you make more silver clothes, and sell them for more money to more happy buyers… greedy you!
You have a shelf full of books. One of them is signed by a famous author. It's cool to have it as a conversation piece. That author dies, and suddenly the book is worth enough to pay for some needed home repairs. So you sell it… greedy you!
That’s not greed. Greed implies excess and has a strongly negative connotation. Just any old decision that benefits self is not greed. Choosing a higher paying job is not greed. Selling something at market rate is not greed. Would you really sell a car or a house without taking into account ANY market information?
> But people who sold used cars did not have their costs increase - they were, after all, selling an already completed product.
Didn't they? Increased demand for used cars should mean that used car buyers are forced to pay more for the same car than they would previously. Maybe it's lagging by a bit, but I would absolutely expect that their costs would go up.
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."
Without a doubt monetary policy has fueled inflation, but do not ignore the policies of allowing corporate mergers for the last 40 years. Lack of competition reduces price elasticity, and the end game of every monopoly is to raise prices. We are living in a world of global monopsonies, and my expectation is to contine to pay this monopoly tax for years.
Worse, is it’s never been easier to collude. It used to be you had to pay a big consulting firm big money for them to tell you “current market rates” for many goods and services. Now you can just subscribe to same SaaS everyone in your industry uses and have it tell you how much to charge. This tends to help break out of a prisoner’s dilemma.
This was something I never quite anticipated. I used the intenet when it was young to help do price discovery and find better deals. Never occurred to me the end game was for companies to do it even better for pricing. Even after seeing thrift store pricing adjust due to seeing online prices on ebay, it didn’t occur to me the scale it would happen elsewhere.
There are 20 different burger restaurants within 10 miles of me. Some are chains, some are local. Some use major beef suppliers, some use local organic ones. All of their prices have gone way up.
There is no collusion here and this has jack shit to do with mergers. If those were the causes, inflation would have been a crisis 10 years ago.
How many of these burger joints own the building they operate in?
This is a very shallow look at economic forces. And ignores some of the bigger squeezes happening. The number of landlords continues to decline as real estate is consolidated in fewer hands. And worse, the number of landlords that abdicate their roles to real estate management companies grows every year, and the percentage of properties in an area run by a given management company continues to grow as well. This creates a level of “collusion” that didn’t really exist 30 years ago.
Our current market abhors competition, and regulators and courts have increasingly sided with the bigger business.
Inflation was a huge problem 10 years ago. It’s why I stopped renting.
Rental prices and estate prices have been rising since at least 2010. So much longer than 10 years, but the prices have not risen commensurate to this with a multiplier like they did lately.
So, the inflation story is most certainly a lie. The businesses started to charge more because they had an excuse in (a minor) supply shock and fuel price rises. But it's just that, an excuse. Worst case pure inflation is about 10% while the increases are... a lot. Especially in some sectors.
The situation is "so bad" for some corporations they're instituting stock buybacks. :) So stockholders are getting rich.
You’re bending over backwards to make your narrative fit. These burger restaurants are a blend of major national chains and completely local ones. The local ones absolutely are not “instituting buybacks”.
This is not some corporate conspiracy. The fed’s comments on inflation have made it very clear there is a labor shortage in the services sector that is driving up costs there quickly.
Starting hourly rates at these restaurants are now $20/hr, up from $15 a couple of years ago, and that’s still not enough. Each one of them has hiring signs and is clearly short staffed.
The only collusion is the default one: profit at all costs.
Everyone raises prices to increase profits, increasing inflation, that increases prices further...
I don't understand why people are so happy to blame governments and treat companies, in which profit is their raison d'être, as if they're only "reacting to the government".
Of course both are to blame, but let's stop pretending companies are victims while record profits are seen everywhere (adjusted to inflation). Many (if not most) are clearly taking advantage of this exact sentiment against the government to pocket even more profit. It's not me, it's the inflation!
Rare for whom? At any point in time this is happening in many countries around the world.
I don't see how the frequency changes my assertion though. That's the regular boom/bust cycle from capitalism. There are many theories on why that happens but the fact is: they happen.
> Do not buy into that narrative. ... Carrefour's profits in 2022 were about the same as in 2019.
Isn't this exactly why we should buy into this narrative? The manufacturers increased their margins, so Carrefour sells more expensive, but in the end gets the same total profit.
The parent is saying that these "increase in margins" are companies trying to get ahead of inflation. The media narrative has been to blame the corporations, despite the real issue being the economy. There are elections to worry about, so we can't have that.
Smart businesses don't wait until they start losing money to make adjustments. They plan ahead. These "margin increases" are literally increases due to inflation which will companies expect to take hold over the next 1-2 years. There could be a variety of factors for this. One such example is corporate bonds rolling over to new interest rates which are expected to start happening en masse very soon.
They are only record profits when you don’t adjust for inflation. Companies in Zimbabwe were making record profits every year, what a booming economy!!!
The research paper linked by the parent comment is using Gross Operating Surplus and EBITDA metrics: Gross operating surplus differs from profits shown in company accounts for several reasons. Only a subset of total costs are subtracted from gross output to
calculate the gross operating surplus. Essentially it is gross output less the cost of intermediate goods and services to give gross value added, and less compensation of employees and taxes and subsidies on production and imports.
There are obvious financial cost increases that have happened which are falsely represented as 'profit' in this analysis.
Record profits in a period of inflation is not surprising.
If the value of the Australian dollar halves, then a company doubling it's raw profit figures is really just staying maintaining the same profits in real value.
The problem in Austrialia is a lack of competition, hence Woolworths can get a 5.9% profit compared with say Tesco in the UK with 3.8% profit (the UK having far more competition)
Not only that but while demand is decreasing, profits are increasing. That's a ridiculous system and shows a broken market.
it sounds a lot like there is plenty of money to be made from the figures parent is stating. Maybe it ought to be prased more like "unique logistical challenges" because clearly some few companies have made it work very well
If the value of the Australian dollar halves, and a company manages to double its raw profit figures... doesn't that still sound like price gouging?
Why would their "maintaining the same profits in real value" be acceptable when no-one else in the end to end chain (producers, customers, etc) managed to in the situation.
It's not price gouging: the value of currencies are almost certainly never going to return to their pre-pandemic levels. Price gouging typically refers to raising prices in a specific exceptional situation like a disaster. Inflation is not exceptional, it's happening worldwide (though more in some countries than others). It's also not a temporary. It's lasted years and even if inflation returns to 2% the prices are going to stay high.
Again, if the value of currency halves and profits in raw curry terms doubles then profit in terms of real value has remained the same. If a company pays it's employees $30 and the value of currency halves, and it raises wages to $45 did they really raise wages? In raw terms, yes, but in real terms no. The value of wages has actually gone down.
Except that really is what happens. If the prices of your inputs increase, then you have to raise the prices of your goods. And then companies that use your goods isn't puts have to raise their prices, and so on.
But even if it's true, and they recorded the largest profits, the catalyst still is the monetary policy. If businesses could just price gauge their clients, they would have already done it before. The goal of a corporation has always been to maximize utility, and this hasn't suddenly changed; so ask yourself, why are they raising prices now.
> But even if it's true, and they recorded the largest profits, the catalyst still is the monetary policy. If businesses could just price gauge their clients, they would have already done it before.
You can't think of any major global event that happened since 2020 that may work as a "distraction" and a cover while businesses engage in monopolistic/anti-competitive behavior?
Sorry but branded products particularly from big brands like Unilever have become crazily expensive. The branded product is sometimes up to 5 times more expensive than the store brand for the same product. To me the most crazy product that was too expensive was some water ice, which is literally water, sugar, and some flavoring/coloring.
Sure there is inflation, but maybe those companies keep sending excel files to each-others department and keep increasing prices multiple times more than needed.
That "narrative" is coming from food corporations bragging in their quarterly earnings calls that they're not lowering prices even as fuel, labor, and material prices fall coming off the pandemic, because they've gotten people used to the higher prices.
Canadian retailer profits have been off the charts, fwiw. Inflation has been quite brutal and merciless in Canada, with retail chain owners fat extra paychecks in the tens or hundreds of millions.
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.
From my perspective, you're saying the same thing as the parent: both prices and margins have gone up. Then you're stating the definition of inflation.
Parent's comment was (implicitly) about 50% of this inflation being avoidable and thus surprising, because margins didn't necessarily have to go up to keep business going. It was just a seized opportunity. If you can show that margins unavoidably always go up during inflation because of some fundamental mechanism, then that would be a refutal of the parent argument.
I'm not sure anybody fully understands the mechanism (for the most studied phenomenon of economics, inflation is quite badly understood), but that doesn't change the fact.
Anyway, if you run the Keynes model for macroeconomics, the average margin increases very naturally when the money supply increases. It increases even more if the new money is injected in the economy by well distributed government spending. Still, that's one model we have that kinda works, but it's so full of problems that you can't take its predictions for granted.
For example, if there's a natural disaster, and the people in power aren't dumb, they'll let prices float instead of putting caps in place, and everyone will be incentivised to rent big trucks full of water bottles and sell it for 20-50x the normal price. For the affected people it makes sense because now they can drink water, and if the prices were controlled nobody would make the drive. Eventually enough people do the drive or the disaster passes and prices normalize.
At the moment it's hard to explain what is happening but it might be more complex than just "nothing to see here". I've come to realize that reality is more nuanced than Milton Friedman made it out to be (and he did too later in life).
> if there's a natural disaster, and the people in power aren't dumb, they'll let prices float instead of putting caps in place
I think most states that experience natural disasters have price gouging laws that make it illegal to raise prices, during a declared emergency, beyond the level required by increased costs.
Or at least I know Louisiana[1] and California[2] do.
And here in Louisiana we've had a lot of disasters and it generally works (sometimes gouging still happens).
"Works" in the sense that it keeps prices from going to high. Fails in that it prevents people from preparing adequately for forseeable disasters and bringing in more of the things people need in a disaster.
In my opinion, disasters that have some level of predictability (hurricanes are the best example) shouldn't have price gouging laws. If you were allowed to raise your prices arbitrarily high, and you knew a hurricane was coming, what would you do? Bring in as many of the goods as you thought you could get higher prices for as you could. This results in an equilibrium where lots more water, food, batteries, etc. gets brought in, prices rise only somewhat, and no law is necessary.
Now, I agree that for disasters that aren't forseeable (like earthquakes), you lose the signalling value, so I'm more amenable to it.
I think implying people aren't able to adequately prepare for hurricanes in Louisiana is begging the question. I've lived here for almost 40 years, through a lot of hurricanes, and that is not my experience.
Sure, some shelves might be bare the day before the storm but that doesn't mean people aren't prepared, that they aren't able to get the things they need, or that the current method does not work.
And when the power is out for a week+ for a whole region (goes beyond the supplies urban locals typically prepare) then government uses the national guard to hand out MREs and/or bottled water in commercial parking lots. This is very rare.
> some shelves might be bare the day before the storm but that doesn't mean people aren't prepared
I remember a study on New York following Hurricane Sandy. Fuel was out. Drugs were supplied. Because nobody was incentivised to bring in extra fuel before the hurricane hit; there was no margin to incentivise it. But there was an incentive to bring in drugs, because dealers could make a killing selling at a premium.
Price-gouging laws are the price of keeping the peace with a population illiterate in basic economics. (And in any case, there is always a black market in play.)
Gas stations can't pump if they don't have power. That's generally why there's a lack of fuel.
Sometimes they have backup power or power companies prioritize them. In the south, local media will help notify which gas stations are operable. More fuel won't solve that problem.
For Sandy they had more issues than just pumps without power. 40% of their supply was reduced before the storm even hit from shutting down refineries. And then the refineries suffered damage. Storage tanks were damaged. Pipelines were inoperative. They couldn't fill delivery trucks. [1][2]
For a typical hurricane, why would there even need to be extra fuel over normal supply? In a hurricane people are driving less. They're staying home.
The only extra fuel will be from generators and hoarders.
Price increases would probably decrease hoarders but it wouldn't turn refineries back on and magically make more gas.
> stations can't pump if they don't have power. That's generally why there's a lack of fuel.
They’re a gas station. They’re sitting on a fuel source. Why do you think it isn’t economical to install a generator? (Or even lease one.)
> why would there even need to be extra fuel over normal supply
Emergency vehicles. Trucks bringing supplies for repairs. People checking in on each other. People coming back from evacuation or leaving to find peace of mind. Also returning to normal life.
And it’s not about extra fuel. It’s about maintaining supplies. New shipments aren’t coming in, which means supplies need to be rationed. New shipments come in slower than they would if prices could rise; nobody serving the general population is incentivised to rush.
> increases would probably decrease hoarders but it wouldn't turn refineries back on and magically make more gas
Emergency shortages are all about distribution, not production. There is plenty of gas in the world in a disaster. It just isn’t making it to disaster victims. (Well, it is. But you have the pay the cab driver cash to pay the guy by Riverside Park for a can at $20/gallon.)
I think it’s a little more complicated than that. I remember fueling up in Chalmette right before Ida, early in the morning, and by the evening or the next day the gas station was out of fuel. Would no price gouging laws have allowed them to inflate the price so much that people couldn’t afford to buy a day early like I did to be able to evacuate?
Government had to provide basic services during a time of emergency and there are regulations in place to stop people taking advantage of vulnerable people.
> Government had to provide basic services during a time of emergency
There were widespread fuel shortages.
> regulations in place to stop people taking advantage of vulnerable people
There were no fuel shortages for folks who could buy on the black market.
> Sounds good
In a sense, the system works. The part of the population that feels good with these rules sits out of the market. The part that thinks it’s silly has access, in part thanks to the shortages/forced curtailment caused by regulation in the legal market, albeit at a steeper mark-up (plus the inherent risks to black market trading).
I have been through multiple natural disasters in the Houston Texas area over some years and I have seen first hand that these price caps cause shortages resulting in people that need supplies not being able to obtain them. The people wanted price caps in the name of preventing price gouging and the state state obliged: the majority of people get nothing and everyone is happy.
Yikes. If the people in power are really smart though they’ll protect their constituents against greedy opportunists and fund the water transportation at cost. Maybe even paid for by taxpayers.
> If the people in power are really smart though they’ll protect their constituents
They have no incentive to do so. If they were actual human beings with functioning consciences maybe, but we often see people use the word "smart" to mean "ruthless asshole without a functioning moral compass". Those people assume everyone else would torture their own grandmother for an extra dollar just like they would, and so everyone who's not abusing the system to its fullest extent is just dumber than them. So in fact the people who are likely to be in power, who have absolutely no incentive to protect their constituents, will likely be in on the con as much as they can, and will actually call themselves "smart" for doing so.
Many US states actually have price gouging laws. In the US, during a natural disaster, many places deploy emergency personnel employed by the government (eg national guard) to pass out water and aid. I’d say the US ranks highly among developed nations as “politicians who are assholes due to bad incentives”.
Thankfully not everyone behaves like an economics textbook.
I guess all people in power must be dumb because every county has laws against grifting necessary essentials in a natural disaster.
It’s possible your point does apply to normal price shifts when supply for something like electronics becomes constrained but right now your example detracts from understanding that.
Some are smart psycopaths. The issue isn't dumb in power but dumb people voting. People get outraged by price gouging so populists create laws against it. Even though those laws don't make economic sense they make political sense.
Most of the time IMO state agents will just ignore price gouging because they know it is a necessary evil but if the need arises they can always intervene in prices, say they are doing something and save face. But this destroys the economy if done often. It's not black and white.
I think it makes more economic sense for the government to directly subsidize necessities by shipping them in and controlling the price or giving them away for free. This is what FEMA does in the US.
What does not make sense is a world where people have to buy disaster issuance just to make sure they can afford water when a hurricane strikes.
Wouldn't Texas and their electric infrastructure and pricing be that defines the reality of price floating while showing people in power are dumb? As showing by the lack of regulation to weather treat your power infrastructure? So cold that the water pumps to cool nuclear power plants freeze? So cold that the natural gas lines freeze? So low in quality that they cannot be connect to the national electric infrastructure to allow for non-price gouging use during national disasters, hot or cold?
Shouldn't it be humanity that takes offense in a natural disaster instead of financial exploitation?
Imagine you buy for X, and sell to some supermarket for Y, and they pay you in T time.
Optimum Y is not related to X, but the price when you replace the stock. ( let's say X2 ) When supply has problems, or economy is unpredictable, it is harder to predict X2, so usually your estimation is a bit off.
So you have to have bigger margin to cover for this estimation error. ( assume the worst )
So they increase margin to cover for uncertainty and incorrect estimations. And in case the original estimations were right, the higher profit is just unintended consequence.
Since it's not market optimal, after they note the extra profit, why don't they lower the prices or hire more workforce or expand?
Or at least share the windfall with employees indirectly boosting the economy total, including their own position?
(Yes, equilibrium economics is a joke even when law of big numbers is involved.)
The rather soulless economics answer is that the companies want to make the same profit as before the inflation, so they need higher margins on individual sales to make up for the reduction in volume. Since demand doesn't drop, this is a feasible strategy.
That answer doesn't make sense, because surely, companies want to increase their profits regardless of whether inflation is happening or not.
The real answer is that when inflation is happening, it provides an easy excuse for raising prices far beyond the cost of your inputs. Everyone expects prices to go up, so they don't balk at yours going up faster than inflation.
The idea is that the company normally prices their products at the intersection of supply and demand, where there is maximum profit. When supply is artificially constrained, they raise prices to the corresponding spot on the curve. This is not as profitable as before, but it's the new local maximum.
It's one of those simple macro-econ models that sound good, but never play out in real life because humans aren't calculators. The reality is a mix of both, probably more of your explanation.
Supply drops mean price increases. Goods have multiple inputs but don’t see equal increases across the board. Ie rent isn’t going up in a grain shortage.
Critically higher profit margins doesn’t necessarily translate to higher profits because you’re selling fewer goods.
Because a lot of companies are using "inflation" as an excuse to raise prices.
Remember, prices generally are a function of the cost the market will bear. If the general public will pay more for something, why not rise the price? If everyone is rising their prices at the same time, you have less pressure to compete on prices.
> 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?
There’s too little goods being produced for too much people having money. Therefore the people selling goods can raise prices.
For some reason people assume that workers can’t be left worse off with inflation bc they assume wages have to increase to follow it. It doesn’t have to be the case. In Europe, workers are becoming poorer.
Companies didn't have a single easy worldwide excuse that people would readily accept for big price hikes. "Oh, it's because of the pandemic" was not a PR strategy available in 2010.
Unless you're in a highly regulated sector like energy or healthcare, in most countries you don't need an excuse to hike prices.
Again, the "prices are higher cuz corporate greed" logic fails to account the basic fact that companies are always profit maximizing and no relevant legislation related to corporate profits was passed in most countries. If they can increase prices without losing customers, they will.
So, again, what has changed? Search for the balance sheet of your local central bank and you will have an answer.
Mostly due to supporting American stand of sanctioning Russia for Zelenskyy and partially sanctioning Chinese companies. In short, they did it to themselves. As for their citizens, I would say they are getting what they voted for (or didn't do any unalivement when some of those voted leaders betrayed their interest).
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.
You can already shop at Aldi if you like things to come in standardised sizes.
(I love Aldi! But I think such regulation would be pretty silly. But we already have such regulation in many parts of the world for many goods. Eg publ in the UK can't just sell you 500ml of beer, they need to give you a pint.)
Germany used to have that legislation, removed in 2009. Legal packaging sizes were e.g. 100g, 250g, 500g, 750g, 1000g.
Removed because it was, unsurprisingly, not the lowest common denominator EU wide. It's almost universally considered a tragic loss, I guess the only exception are those whose job description includes getting creative with packaging size.
They still have legislation that you have to prominently display the 'Euro per 100g' price? I consider that good enough, and packaging size should be left to the customer.
(The old rule had lots of exceptions and loophole anyway. I remember that fresh yeast almost always came in little cubes of something like 42g, because that's a convenient amount for baking. And no one had any problems with that.
Do you really want bureaucrats or politicians to decide on arguments about what odd sizes are convenient enough to warrant granting such exceptions?)
However, I do remember shopping in Britain, where Tesco would give you the mandated unit price for one kind of apple per piece and the next box over with a different variety of apple would give you the unit price per kg. British supermarkets were a bit customer hostile like that. (I noticed them get a lot better when Aldi and Lidl really took hold in the UK. Especially those confusing '5-for-3' deals etc got much rarer.)
As sibling comment said, I think this is bound to cause unintended side-effects. I think it would be simpler to require per-unit pricing alongside overall cost, and regulate that amount. Nothing more frustrating than seeing a per ml or oz cost on one item and a per-count cost on one right next to it.
In France, there is always the price per unit. And since the units are not in grain of barley nor a game of guess work (is this ounce dry or wet today?), it's obviously much easier to compare.
At my Kroger, almost half the times I try to compare unit price bergen two products, the units are different (e.g. $/oz or $/lb or $/g). And these are always products right next to each other on the shelf.
Enforcing legal standard weights/sizes for everything that businesses cannot deviate from would be ridiculous... and that wouldn't reduce inflation, either.
List the price per litre or per kg, for instance, for every item in addition to the item's price and people can then compare between different brands on the shelf. This is already done in many cases though I do not know if there is a legal obligation.
People are not stupid by the way, they notice when an item they are used to buy shrinks.
I've been saying this for ages. There are so many second-order benefits. For example in Japan, books are virtually all a standard size, and so bookshelves are built to match. Lets you fit more books in a small home.
When packages are random sizes and always varying, it's impossible for anyone in adjacent industries to develop synergies.
Be wary of engineering society as you would a machine. You don’t know which efficiency you’re destroying in favor of whatever efficiency you may or may not be getting.
A grocery story where all the isles are filled with identically sized boxes full of standardized products sounds pretty depressing, for one thing.
Inflation can allow corporations to be less price-competitive, because it gets harder for consumers to judge price competitiveness. For example, you sit down at your favourite burger restaurant and see on the menu the price is now $12 instead of $8. Are they just passing on increased costs? Or are they taking the opportunity to pad their profits? I can't really tell, not without seeing if prices have gone up comparably at similar restaurants, but I'm here now and I'm hungry.
The price used to be $8 because they were in a tight battle with other burger joints, and that was as low as they could get it. Now they have to fight their suppliers, but not so much with their competition.
This is one of the reasons why high inflation creates unstable inflation, and why central banks like to keep inflation low.
That is called the "cost-push" theory of inflation, and its giant problem is it doesn't explain where the extra money comes from that is necessary for sustained price increases across the economy.
It's sibling is "demand-pull" where customer demand causes inflation, but it equally does not explain where the extra money comes from.
A theory that does explain it is the government dumping cash into the economy - inflation consistently picks up about a year after this is done.
(I'm sure you're aware of this, but price increases only require increased spending from customers if transaction volume is held constant. It's entirely possible for prices to rise to arbitrary heights even as the economy contracts and customers become poorer, either because supplies dry up, or because high-volume demand dries up and companies are forced to shift to a smaller but wealthier customer base with high spending power.)
More importantly, this is why I said that inflation becomes more unstable when it is higher. Dramatic price increases can happen as companies become less competitive, and then price collapses can happen as well as consumers tap out and companies are forced to compete for a shrinking pie. Economists generally prefer low inflation rather than high inflation, even if all else is equal in real terms, because higher inflation brings higher volatility.
Lastly, this isn't necessarily the driver that initiates inflation, but it is a feedback loop that can propel it to overshoot an increase in the volume of money.
> I'm sure you're aware of this, but price increases only require increased spending from customers if transaction volume is held constant
Reduced demand reduces prices. It's the Law of Supply & Demand at work.
The Law is always at work, even money is subjected to it. Increase the supply of money, and the value of a dollar drops accordingly. We see this effect as inflation.
In physics, we know that momentum is conserved. Any theory that deviates from that is wrong, even if we can't figure out why it is wrong.
Analogously, any economic theory that results in a "free lunch" is wrong. Any economic theory that denies the Law of Supply & Demand is also wrong. Bad government economic policies are nearly always the result of denying the existence of the Law of Supply & Demand, which is as doomed as denying the Law of Gravity.
Nothing stops the government from pretending that deficit spending is a free lunch, and they sell that notion at every opportunity. But the Law of S+D still applies.
The elephant in the room is the sheer size of the several trillions in deficit spending. There's just no way to ignore it and explain inflation away by suddenly every business is price gouging. It's not a compelling explanation at all.
> Reduced demand reduces prices. It's the Law of Supply & Demand at work.
You have to be careful when asserting this though, because demand does not mean what most people think it means. In particular, it does not refer to the number of people demanding a good, nor does it refer to a volume of goods purchased. A declining sales volume occurring together with rising prices does not violate the law of supply and demand.
Yes, rising prices reduce demand. But rising volumes also create economies of scale and allow low prices. There's a delicate balance and sometimes an equilibrium of large volume, low price can transition to a new equilibrium of low volume, high price, or vise-versa. For example, if you are a software company and you sell software to a small group of professionals, like a CAD program, your price is probably around $1000 ~ $5000 per seat, per year. And competition will not lower it, because your competitors face the same economic situation you do: it's a niche product, you have to amortize a high development cost over a small number of customers, and those customers have money and are willing to pay.
However, there is also a stable equilibrium for a company to turn a similar profit shipping software of equal quality to a very large number of people for a very low price. Something like a spreadsheet or word-processing software. Now your software is cheap, or supported by ad revenue, and yet you can still remain highly profitable. If, however, your userbase started to shrink for whatever reason, you might have to charge the remaining users a large amount. Most will leave, but a few of those users may derive a lot of value from your software and are willing to pay, and you end up with the same economics as the CAD developer.
Software is of course an extreme example, where the marginal cost of production is approximately zero, but most industries outside of resource extraction have declining marginal costs with scale. That's why you can end up with high-quality cheap components (like cameras, etc) that are used in smartphones, where they have high-volume production, and very expensive specialty cameras for eg. microscopes, even though the specialty camera required much less investment of R&D to produce. It can only be sold at a high price because there is not enough demand to reach economies of scale that would allow a lower price.
So if for whatever reason, money was sucked out of the economy and the average person suddenly became very poor and could not afford a smartphone, it's possible that smartphone companies would compete hard to keep those customers and drop their prices. But if that doesn't make for a sustainable business, the smartphone makers have to drop production to sell only to a few wealthy buyers, the remaining phones will get much more expensive, because their components will be made in expensive fabs at smaller volumes. The total revenue will be lower, the GDP would be lower, but the average price of goods can still be higher. Especially when there's a large wealth disparity to make that high-price low-volume equilibrium stable.
Inflation isn't a price increase in one item. It's a price increase across the economy, including wages.
Your theory of inflation does not explain why it isn't continuous, and tends to follow periods of enormous deficit spending. That's a common factor to inflationary episodes, not some industry figuring out how to gouge.
I'm not sure what theory of inflation you think I've presented, because I haven't presented a complete one -- I've only offered an explanation of how already-high inflation enables corporations to become less price-competitive, which makes inflation more volatile, and you will find the same explanation in mainstream economics and central bank publications. (I did explain why it isn't continuous). It doesn't make any attempt to explain what instigates the inflation to begin with, which could certainly be caused by a spike in deficit spending, or a natural disaster that reduces supply, or a trade embargo, or a war, etc.
Inflation isn't a price increase in one item, but the scenario I presented above does not create a tradeoff between one item and another; it can apply to any and all category of manufactured goods or services where efficiencies of scale apply. Macroeconomists usually assume only a single fungible good anyway (a "widget").
Inflation does nothing on its own; it does not have agency. It's just a description of a symptom (increase in price). Whether that set of symptoms (Disease) is caused by price gauging or labor price increases or resource prioritization is not known just from inflation.
Although if you see that profits are way up then you know its not due to labor price increases as that company's revenue and expenses would both be up and not just revenue.
If I pour water into a cup and the line says 100 ML there's 100 ML of water. That measurement of 100 ML is a descriptor of how much water that is.
Inflation is a descriptor of how much prices have increased.
If we measure the line a second time and it says 120 ML then the water level has increased (i.e. inflation occurred). But why inflation occurred is not know _just_ by measuring the water level.
If firms increase their prices by 10% then the firm is causing inflation (prices have increased). If said firm also gets a 10% increase in their profits then we people would say inflation is entirely driven by profits (although probably strictly inaccurate). However at no point does "inflation" cause something. Inflation is _just_ a measurement.
--
Sticking with the incorrect math, if your prices go up 10% and your profits go up 10% you are the cause of inflation.
If your suppliers increased their prices by 10% so you increased your prices 10% then your profit goes up 0% and if your suppliers profit went up 10% then they're the cause of inflation.
This second example is why people are getting upset. Companies are all complaining they need to raise prices "due to inflation" but since their profit margins are just getting better people are suspicious of how much of the price increase is dictated by their supplier's price increases versus greed (value pricing).
Au contraire. Inflation comes from too much money chasing too few goods and services. How does too much money come about? The government prints money to deficit spend. Why does this cause inflation? The Law of Supply and Demand. Too much money means the money is worth less.
Individual companies cannot cause inflation, because they cannot increase the money supply.
>> a general increase in prices and fall in the purchasing value of money.
Also companies can 100% increase their prices and if a singular company such as Exxon does it then pretty much every company will also increase their prices because their cost of revenue went up.
I see you've moved past trying to argue what the definition of inflation is so I can only assume you've agreed me with.
So to move on to your new topic, there is a framing problem here. There does not need to be extra money during a period with inflation.
If I had $100 dollars and potatoes are $2 and a car is $50 I can get 25 potatoes and 1 car.
If the costs of a car increases to $80 I can get 10 potatoes and 1 car. Inflation has occurred and I haven't done any changes to the money supply here.
And then of course, Inflation isn't a new word post-Bretton Woods; there was inflation when people used gold as currency.
Or as companies like to call it 'not leaving money on the table'.
Prices have outpaced inflation. Everything has, except worker pay and minimum wage.
Profits are record-breaking while laying off workers. CEO compensation and bonuses are insane. Housing prices are out of control. Gas is still $5/gallon where I'm at.
It’s not irrational to be mad. All the poor see is that they are getting screwed and the rich are doing fine (sometime thriving) no platitudes about “economics” are going to make them feel better.
Wages by definition also increase with inflation. (Inflation is a general increase in prices and wages are a price.) Though you can have both unemployment and inflation at once, called stagflation.
Also in the US, the lowest 10% of real wages has grown significantly since 2020, lowering income inequality vs the middle class.
> In states like Texas minimum wage is still $7.25/hr and many places pay just that.
> How do you reconcile your numbers with that?
'Assistant Commissioner for Regional Operations Stanley W. Suchman noted that the 196,000 workers earning the federal minimum wage or less made up 3.1 percent of all hourly paid workers in the state. Nationwide, those earning the federal minimum or less accounted for 2.3 percent of the hourly paid workforce.'
It doesn't matter what the minimum wage is though, it matters what people are actually paid. Denmark doesn't have a minimum wage and they're doing okay.
> Bills have outpaced wages to the point nearly a whole generation of young adults have given up on home ownership and have had to move back home.
Not true, and Texas is fairly affordable. (It's blue states that aren't because they all refuse to build homes.)
> Mortgages are increasing in years and rates, even new cars have.
Rate increases theoretically don't affect the total price of a new mortgage because you can negotiate the sale price down to make up for it. Supply and demand is what controls the total price. Higher rates do reduce new construction though.
Cars got more expensive because they stopped making cheap new cars, which is bad, but it's not 100% of CPI any more than rent is.
> Income inequality has never been higher and you're seriously saying it's gotten better since the greatest wealth transfer in history?!
No, income (wage) inequality peaked in 2014 and has been flat since, then decreased since 2019.
The real great wealth transfer in history was the 2020 CARES act giving a lot of money to the poor. We should do it again. (This is the one that a lot of people online like to say "we only got $600" about which is a straight up lie. It was up to $2400/month for an unemployed mother with children.)
The one that went up is wealth inequality, meaning value of unrealized assets like stock portfolios. But that's not nearly as real as cash. (Also, our top tech billionaires Gates/Bezos/Musk helped inequality out by losing half of their wealth by cheating on their wives or buying Twitter.)
> Denmark doesn't have a minimum wage and they're doing okay.
It’s more complicated than that, and you know it, or you’re using that fact to further your point somewhat disingenuously. Yes, there in no minimum wage defined by law, but in practice it’s around €20 due to the collective bargaining agreements (read: unions) in most industries.
There's nothing to hide here. Just look at the median wage in both places. Or in this case, the lowest 10% wage.
I prefer Australia's wage board system, but I think nobody knows how it works because they're Australian so they've given stupid names to everything. Try and guess what "award" and "casual loading" mean.
I disagree. I live here and regularly see people exploited. It's not uncommon for students from romania/moldavia/bulgaria being paid a literal token fee per hour just so they can register enough hours to claim SU. Job listings advertising this fact brazenly, because its not even illegal... Similarly a whole bunch of workers here in nordjylland's factory farms get paid ridiculously low salaries per hour. We're talking 70kr per hour or less.
The way inflation is measured is debatable. It's in the government's best interests to measure it in such a way as to make the number as small as possible.
Or, as many people suspect, the government calculation of inflation is deliberately under representing it. The government doesn't like to admit it is the cause of inflation, hence all the excuses for it coming from the government, like "Putin's Price Hike" and all that other economically illiterate nonsense.
Companies can raise their prices at any time. So why don't they? Why do they do it only after the government dumps trillions of newly printed money into the economy?
That's Carrefour, not the product manufacturers. In fact, the evidence you present is completely consistent with Carrefour's assertion that they have been doing what they can to absorb the price increases taken by the product manufacturers.
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...
The EU does have some rules about this [1], "The unit price shall refer to a quantity declared in accordance with national and Community provisions", but I've still seen similar products priced per 100g and a different brand priced per "item".
Here in the Netherlands, all units are metric (g, ml, g, kg). Liquid products are advertised by volume, but is they're watery (ie. most products), you can just assume litres are kilograms.
Fatty or very sugary liquid products (e.g. cream, syrup) are the only things that can't easily be compared to kg price. I've only seen those advertised by volume, so they can still be compared to their peers.
Well, after a while I do roughly memorize it for the things I buy the most, don't you roughly remember the non-per-unit price if that is what you are looking at ?
But that was not my point, the price per unit is to compare similar products with each other in the span of a minute or so.
Because if they are ALL going up (or down), then there are clearly external factors to that price change. At worst it's the fault of the supermarket (and here remembering the rough price/unit comes handy, for comparisons in others), or an issue with a monopoly/cartel collusion, in which case hopefully consumer associations are going to start whistleblowing, leading to government handing out punishments.
Sounds like a great opportunity for an AR app that can compute and overlay differences in your field of view. It would be cool to run this on the Apple Goggles. (I am not ready to see people walking around wearing those things in real life).
It's even worse when the products you are trying to compare unit prices for when one of them shares a volume unit price and the other a weight unit price and another is in counts.
This isn't my experience, so I went looking and found this:
> Uniform Unit Pricing Regulations apply only when stores voluntarily provide unit pricing information. The unit of measure chosen must be consistent across like items within the category.
So if a store offers unit pricing it must be consistent within a category.
I don't think I've ever seen the price per unit unit not be the across brands of the same packaging type. Now this does get dicy for individual wrapped things, but outside of that everything uses the same unit in the same range.
Even still, this is not a reasonable approach to tracking shrinkflation because I know I don't keep a running log of prices from week to week. I do sometimes notice package shrinking, but only because I buy weekly. If I wad a bulk buyer I'm not sure I'd notice as fast
Or in Canada, BC. Things like meat can be priced in $/lb or $/100g in the same cabinet. Makes the mental math tricky and you can think something is cheap when it is not.
You will literally have 3 packages of soda all of the same size listing the price per unit in completely different units. Some in ml, some in oz, some in pts.
I had a bag of salad croutons that measured a serving as “2 Tablespoons” — are they expecting me to crush the croutons to measure a serving? Or just “eyeball” it to convert rectangular things into hemispherical things?
It's worse than that. The serving size changes the resulting label. A lot of the high-protein breads have the same composition and are sliced slightly thicker to hit the 3.5g mark so they can round up to 4g per slice and appear to be more protein rich in composition.
And then I find myself checking the packaging of a frozen pizza (please don't judge me). There is a small plastic window on the front and I can tell that there is a pizza inside and from tipping it I can tell that the pizza is smaller than the box. The label says that the pizza is 500g (20 oz) which is totally useless to me because I can't remember if the box said 500, 550, or 600g when I bought it 3 months ago.
It seems extremely burdensome to do that every time you go shopping. Also, it requires people to remember the unit price of the same product across multiple trips - whereas most people who do check the unit price do so in a side by side comparison with a different brand of the same type of 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.
"2.1 million people in the UK lived in household which had used a food bank in the previous 12 months, a rate of 3%. This includes 6% of children, 3% of working-age adults, and around 0% of pensioners."
6% of children feels not great, though other stats say the US is much worse, with 6+% of all households, not just children...and I've seen higher estimates.
That's a small minority that has used a food bank at least once in 12 months. The number of people 'relying' on them has to be even lower. We also can't discount that some people could have bought food but chose the food bank instead because it is free.
My point was that writing 'many' suggests something common and widespread like if there were breadlines everywhere. It is not (but The Guardian likes to dramatise on this).
In fact, I suspect that poorer people in the UK have a much higher chance of being obese than of being actually hungry.
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.
I had a similar experience recently. The jar looked the same, but as it turned out they simply used significantly thicker glass to hide the weight difference caused by the reduced content.
> 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.
That assumes there's extra profits. They also have to pay for materials, labor, etc. which have also gone up recently. Perhaps they're making the same profit (amount or percent) they were 4 years ago at that size/price?
BUT, we don't really know how these gross margins are actually calculated (meaning, the reporting is all done by these corporations with very complicated accounting methodologies). All things considered though, 41.9% gross profit margin for 2022 is still pretty good. With the supply chain easing, I am very curious to see how that profit margin looks like in 2023.
My totally unsubstantiated guess is like this: labor probably got a 10% bump since COVID; raw materials and oil/gas (for transportation) probably also had like 10-20%% bump in total. Then the remaining 5% (from 35% increase in just the price, NOT including the profit from shrinking) is probably going toward the extra coffers of the corporations.
FYI on the detergent point: the new bottle may be more concentrated. I saw this too but when I compared the two bottles closely the dose size was also reduced (and I suppose the detergent more concentred, though hard to verify).
The old one is 195 loads and the new one is *supposedly* 200 loads. I never really paid attention to those load numbers because in the end, I just use the measure cup (that comes with the container).
Even worse is the shrinkflation with stealth price increase.
Haagen Dazs recently reduced the size of their ice cream containers from 500ml to 450 ml while keeping the price the same.
Fine. They succumbed to shrinkflation.
But it's only at the checkout counter where you get hit with the stealth price increase.
In Canada, they tax individual items of certain foods but don't tax family-size portions of those foods.
It turns out that 500ml is the limit for family-sized portion of ice cream container. Buying less than 500ml results in the store charging tax on the item (Ontario HST is 13%).
So Haagen Dazs is getting a bit more and the government gets some where before they got nothing.
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.
What are you talking about though, it absolutely is "sustainable", and businesses have been doing it at least a couple decades, so why would they stop? It makes the profit line go up, which is all that matters.
They're not pitching to consumers in the grocery store aisles, they're pitching to corporate executives in board rooms. The world looks different in each of these places.
The C suite and MBAs will be the last to be outsourced to ChatGPT. What we need is more new companies entering the fray. The problem is why would you enter this industry with its terrible margins when you could start a tech company instead?
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.
I recently discovered detergents and powders regularly overstate how much is required for a wash, and it even leads to worse results, I'm normally sceptical (or just ignorant) of such articles but I halved how much I used and it seemed to be pretty much true for day to day washing (Don't know about massively dirty clothes, but talking weekly wash here)
I learned this a long time ago when talking with some of my appliance repair friends. Lots of washers break because they're gummed up with excess soap.
I've been running my loads at 1/4 or less of the soap recommended by the manufacturer for years and years and I've never had any issues out of my washer, mechanical or clean wise. Once or twice a year, something will need a second wash or spot treatment, but otherwise everything is pristine.
Not to defend the recommendation as they clearly have an interest in trying to get people to use as much as possible, there is a potentially valid reason for this, which is that it depends on the type of water you have.
Water from a municipal supply is generally well-treated and usually soft, in which case you can get by using less detergent. However with hard water (often sourced from wells), more detergent is needed to get the same cleaning effect.
Maybe they could try to explain this, or maybe they just ignore it for the sake of simplicity (of the instructions on the bottle), and the increased sales is just a nice side effect.
It's Arm & Hammer, though I presume the branding is a more or less interchangeable packaging detail from the other detergent brands produced by CPG giant Church & Dwight.
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.
As a buyer, they have a reputation to be driving producers to the ground. Their buying power is so large that they can pretty much dictate the costs, which drives all sorts of issues - brankrupting the smaller ones, lowering the quality across the board, forcing them to take shortcuts, cheating, shrinkflating, etc.
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.
If they’re just wielding power over manufacturers, they also have the power to give into negotiations to remove the labels if manufacturers pay enough.
Which means it’s ultimately no longer about benefiting the customers, but squeezing as much as they can from manufacturers, and we end up with only get part of the truth.
I suppose hypothetically if they were murdering their suppliers' employees then we'd need to put a stop to that. But otherwise yeah, all the more power to them.
It does, I won't applaud Putin if he switches to electric tanks. (not that Carrefour is Putin, but you get the point - a marginal fix from someone who is a nontrivial cause of a problem is not a triumph)
This is a good idea, shame drives change, and it's good that customers get better information.
But also, the customer rarely benefits from large monopolies leveraging their power. Somehow they're always the losing bystander in these battles. I'm suspecting that the real motive is different, and I don't know the long term consequences of how they're gonna leverage that new negotiation tool. (maybe they won't display it if the manufacturer gives them a discount?). And then maybe it's just marketing, maybe there's no motive, and they want to show they are supportive of their customers. But then once a buyer realizes the tool they have to leverage an extra discount, it may change.
Forgive for being suspicious when an actor that has historically always been acting on their own capitalistic interests starts doing something that is not.
That's hardly abuse of economical power. Wake me up if they decide to remove some label due to a negotiation. Otherwise, that's the slippery slope fallacy, that is false on practice about as often as it's true.
> Carrefour CEO Alexandre Bompard, who also heads French retail industry lobby group FDC, has repeatedly said consumer goods companies are not cooperating in efforts to cut the price of thousands of staples despite a fall in the cost of raw materials.
> The shrinkflation warnings are in all French Carrefour stores, and will last until the targeted suppliers agree to price cuts, Bompais said.
It is not the slippery slope fallacy, it's the proposition that everything that can be used for nefarious purposes eventually will. Someone who repeatedly abuses their economical power doesn't deserve the benefit of the doubt, is my point.
They are doing a good thing, but it's bad because that good thing may allow them to do something bad later?
Sorry, but I'll ask for them to be punished when they try to do the bad thing. Not earlier.
They can do nefarious things whenever they want. They don't need to normalize a good thing first, there are all kinds of anticompetitive actions they can do right now without complex scheming. (And yeah, they constantly do many of those, but still, without any complex scheming.)
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:
Safeway is somewhat insidious with things like this. They'll have a relative price (per pound/oz) for one size of an item, and then for the same item, different size, they'll use a different metric (per packet/slice, etc.) to make them not (easily) directly comparable.
> Safeway is somewhat insidious with things like this. They'll have a relative price (per pound/oz) for one size of an item, and then for the same item, different size, they'll use a different metric (per packet/slice, etc.) to make them not (easily) directly comparable.
Unless there is a really strong pattern, I think that might be a situation were you shouldn't assume malice when stupidity will do.
I think it's quite likely they get the data from that from some feed who's ultimate source (or sources!) is someone keying in whatever's most convenient without any organizational consistency controls between items.
IIRC, every package has to have a weight/volume measure, but that doesn't make the most sense as the "unit" for many products, and there's even room for legitimate disagreement on what the right measure should be (e.g. should you list a package of sliced cheese by the slice, to use the unit the consumer is probably thinking in, or by the oz, to make it comparable to non-sliced cheese).
Such ”incompetence, not malice” errors can be trivially solved by defaulting to the consumer receiving a discount on the item in the event of variations in how the items on the shelves are labeled. Boom, you now have an army of validation specialists going around checking the consistency of your labeling. A very low-cost solution if your errors are truly good-faith and infrequent, you are paying pennies per person-hour!
Some states offer a “scanner bounty” when items transitioned from sticker labeling to scanner pricing with only shelf tags, because vendors would often not update the shelf tags or item tags appropriately when they changed the scanner database. Find an error and receive 10x the difference up to $5.
You will rapidly find stores becoming less incompetent overnight once they have an incentive to be. It’s not that they’re not capable of being competent, there just isn’t a legal requirement or a market incentive to be competent. A law without a penalty for (knowing or un-knowing) noncompliance is just a polite request.
They are profiting and thriving off the tendency for good-natured people to adopt the “incompetence, not malice” mindset and then accept that as a normal standard of behavior. After all, what can be done? Sho ga nai.
These companies negotiate everything, including where the boxes will be located on the shelves, the angles they will be placed at, which competitors will be allowed, the pricing schemes, etc. They will never go “well for the price per unit, let’s just go with whatever random unit our internal systems spit out”.
Its extremely convenient that the mandated data that helps customers cut through the millions they spend on marketing and pricing schemes is the one that is completely uncared for.
You would think so; on the other hand, I just met someone who works for the search team of a major search engine but hadn't noticed that their results listings had turned to garbage over the last few years.
It is definitely malice because they use every unit imaginable to avoid allowing you to compare within an item type (kg, lbs, oz, g, fl oz, “unit” (where unit = package))
Yeah I’m guessing there must be a law about putting the unit prices already or else why would they even have them, so it seems an update might be useful.
In France, at least the law requires showing the current price per kilogram. So what Carrefour is doing is highlighting that this has changed compared to the previous price.
I think the former is the default in the EU/UK. I do find it really helpful, especially when comparing different brands or sizes.
It also allowed me to spot some shady pricing practices, the recent one: dishwasher tablets are 10% cheaper when buying a bunch of smaller packages, rather than a big one. I still buy the latter as it results in less waste but it pisses me off to know how unnecessary and bad for the environment these practices are.
Ontario (and maybe all of Canada?) has the former. Adding the previous price would be nice, but I wonder if it can be games by changing prices frequently.
In EU, by law you are supposed to show the reference price (lowest price in last 30 days pre reduction) in small print. Different implementations in different countries but, at least for me, it does what is supposed to do.
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.
thank you for this term. I’ve been struggling lately with this topic because collusion has some fairly well defined regulatory meaning, and I’ve had to quote the term collusion to avoid some argumentative pushback. I think the rise of computation and networking has allowed for collusion at levels that were impossible 30 years ago. The biggest example of algorithmic collusion brought to my attention in the last few years is a SaaS that many landlord use that all but tells them to raise rents to bring them up to “market rates”. And I’m sure this kind of thing is becoming super prevalent in all kinds of places.
For some items, this is true. But it would still be helpful to be able to compare from one store to the next (by checking the Safeway app while shopping at TJ’s).
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.
This either means that they have a cartel (which is illegal), or they effectively had no choice for some reason or another. ("Inflation" is such a nebulous concept...)
There's quite a few stories outlining how many companies are taking advantage of the "cover" of inflation to take on additional margin. Like, they see cost increases of 5% on their side, but raise prices 10%. It doesn't require a cartel for every notable supplier in a market to have the same idea.
Can't tell if you're serious. People on a budget want to know which line item increases are driving the overspend in the "grocery" category. So they can take some action to counteract it. Source that item elsewhere, consider store brands for that item, do without that item, etc.
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 knew someone who worked for Saintsbury's (UK supermarket) & they said 4 wins before xmas runs of roses chocolates went on the shelves at £10 each, and they expected to sell none until 2 weeks before xmas when they cut the price to £5 and advertised 50% off. Apparently this is (or was at the time?) normal industry behaviour.
Oh yes price increases before planned "sales" are common. I believe there are laws in the UK/EU regarding time frames an item has to be at a certain price before you can say it is "on sale". Something like 28 days sounds familiar so doubling the price of an item that doesn't sell much and having limited (or none?) of the item in stock then dropping it to usual price and calling "half price" no doubt happens constantly with seasonal items like Cadbury Roses.
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.
The article is incomplete, as usual for CNN. Headline makes a bold statement, there isn’t even a photo of a sticker showing the French translation for “shrinkflation”, which I’m not sure exists, and it does put the opinions in perspective of others.
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.
I noticed this at my favorite thai place also. Delivery orders are way smaller than when I picked it up on the way home. I have no idea how they knew the difference between pick up and delivery, but appears to be.
Maybe the person I replied to is a woman. I have a female coworker and she tells me her boyfriend is the playing the homemaker role.
My wife almost never lets me cook or do the dishes.
I could help worded my post differently but decided I would rather attract some downvotes and maybe have some fun with comments like yours.
Edit: your profile is so much fun. Is that Serbian?
Things were always going to end like this. Maybe do the practical thing and get a mate. Not feeding a bag of giant asshole middlemen is just a bonus for you and everyone else.
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.
Note that "bad trip" is the french word for a (drugs related) bad trip, like "weekend" is the french word for weekend. So that explain a bit the name of the movie.
It also means something different [1], English is a huge unmanaged language, for a word with a possible interpretation, there will be a reference to that meaning in a dictionary somewhere.
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.
My Russian girlfriend did not even know that кринж (cringe) was an English word. Not only that, it has been imported as an adjective just like its use in English internet slang (e.g. that's cringe). Then a verb was formed from that: кринжевать.
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.
"We always comply with the labelling laws and regulations requiring objective information about how much product is in the package, including a net weight statement, a serving size, and a servings-per-container statement.
"Consumers can use this information to make accurate and informed purchasing decisions about the amount of product they are buying."
Only if I can remember from one purchase to the next what the price per gram of a specific bar of Lindt chocolate is.
Contrary to the US where you can commonly see 2 bottles of milk sitting next to one another with a price per oz and a price per gallon, in France there is a relatively good uniformity for prices per x. Unless you haven't had the experience yet, you'd know that it makes shopping and product comparison extremely easy, whatever the type of product you're buying.
Great idea but there’s a slippery slope problem. Report on shrinkflation packaging and companies will switch to other less transparent means (ie changing ingredients) and so this adds a bit of perverse incentive. I suppose companies already do the cost cutting, adding filler, etc… I’m a fan of just mandating price per ounce labels on everything. Stores could show current price per ounce and last year’s, no calling out specific brands, just make that data available to consumers on each price tag.
In my experience shrinkflated products already use inferior ingredients, so it's a very useful signal that should be boosted, not eliminated. So putting a warning is a good thing, but shaming is not.
To develop the idea further, most grocery shopping should move online, so I could trivially filter out products with shrinkflated packaging, containing palm oil, nestle brands, etc.
> Great idea but there’s a slippery slope problem. Report on shrinkflation packaging and companies will switch to other less transparent means (ie changing ingredients) and so this adds a bit of perverse incentive.
What makes you think that they are not changing ingredients as well, at the same time? It’s just another button they can tweak to increase margins.
If we follow that kind of logic, then we never put in place any regulation because it would just push people towards worse behaviours. A bit like when people who don’t want taxes say that it would just lead to tax evasion. In reality, there is room for reasonable regulations.
> I’m a fan of just mandating price per ounce labels on everything.
There is already a law to that effect.
> Stores could show current price per ounce and last year’s, no calling out specific brands, just make that data available to consumers on each price tag.
That would be definitely interesting. At the moment they just have to put the old price during sales.
Yeah and it’s still not very useful for certain things. Like I was shopping for toilet paper the other day. The prices seemed outrageous but trying to compare price per square foot is meaningless when some paper is thick, some extra soft, some 1ply, etc. I like the price per weight unit, without packaging to compare not across products, but for the same product over time.
> Guigoz infant formula produced by Nestlé went from 900 grams (31.75 oz) to 830 grams, while Unilever’s Viennetta ice-cream cake shrank to 320 grams from 350 grams.
I've always thought "from -> to" so I'm curious when people use "to <- from".
Is it more common in the UK? Is there a name for this?
One reason for doing this is to add variety to the sentence structure rather than just repeating the same from- to construction for both items. Whether that’s a good choice in this case is a different matter.
> For example, Carrefour said a bottle of sugar-free peach-flavoured Lipton iced tea, produced by PepsiCo, shrank to 1.25 litres (0.33 gallon) from 1.5 litres, resulting in a 40% effective increase in the price a litre.
That's only a 20% -- rather than 40% -- effective increase in the price-per-volume, right?
Trying to figure out what went on there. For example, maybe they meant that the price-per-volume did go up 40%, and they meant that the reduced-size contributed to (rather than "resulted in") that 40% increase? Or, maybe ChatGPT did the math?
> Consumer groups say shrinkflation is a widespread practice, which supermarkets like Carrefour are also guilty of in their own-label products.
No reason to doubt this, given:
> “Obviously, the aim in stigmatising these products is to be able to tell manufacturers to rethink their pricing policy,” Stefen Bompais, the director of client communications at Carrefour, said in an interview.
Long story short, Carrefour doesn't actually give a shit about the deception of customers, except to the extent that their natural rage can be redirected against its suppliers in order to soften negotiating positions. Shrinking their margins either helps maintain total sales revenue, or shifts a larger share of the operating margin to Carrefour.
Carrefour cares about volume pricing, not the size of the packages.
This isn't a new thing, it's started to ramp up around 2008. PepsiCo will often change sizes and names of those sizes to create the illusion of value. Im sure other Mega Corps do the same. They do have to buy commodities many years in advance so a lot of these changes are baked in. They also have other things they do. If the price of say potatoes is going to be high for the next couple of years and they can't justify a price change or a bag size change, then they will move up corn products to eye level and move down the potatoes so that customers are drawn to the higher margin product.
> Guigoz infant formula produced by Nestlé went from 900 grams (31.75 oz) to 830 grams, while Unilever’s Viennetta ice-cream cake shrank to 320 grams from 350 grams.
Wish I could be surprised at Nestle doing the most evil thing possible, but here we are.
In Israel there’s actually a law to protect consumers from such cases.
It requires food manufacturers to add a notice on the package if they decreased the amount of content inside without making major changes to the look of the packaging.
People here are complaining about Carrefour selling the products it's stickering. At least they're taking some steps. The supermarket in my neighborhood is much, much worse. They use dark patterns to further obscure the real price of things to the consumer. They are mandated to provide a per unit price, and they comply with the letter of the law. But what they'll do is use totally different units. The 48 ounce size of a product, going for $2.99, will be priced in ounces at 6.2 cents an ounce. But the 36 ounce size, which costs $2.10, will have a unit price of $1.87 a quart. So now you need a calculator (or at least, an aptitude for division in your head) to figure out which one is more economical. And maybe around 10% of the time, the unit price is just flat out wrong.
Splitting into two parts so I can get yelled at separately:
1) At least in the US, most large companies converted to FIFO (first-in, first-out) accounting so, if today's input prices are up 10%, but a company raises by 5%, their profits skyrocket for a awhile, and then trend down when inventories and long term/sunk costs like leases, amortization of R&D, and labor contracts catch up.
Infuriating when I need 12oz of a product for a recipe and now I can only buy it in 9.5oz cans. Way to go. Now you sold two. More packaging, more waste, more profits!
It was about time. For the past few years, manufacturers just make absurd raises and let the supermarkets get all the flak from the angry consumers.
I had heard about that anecodtally about a local supermarket chain and I was frankly surprised at the time. As most consumers, I also thought that the supermarkets were the ones profiteering. A giant like Carrefour having to call out the manufacturers just shows how much this practice has been used and abused.
Another form of shrinkflation is related to sales tax.
Something I never used to see, across dozens of U.S. states, is sales tax being added separately to the posted price of beeer. But now, when I pay $8 for a 16-oz. drink, they often add the sales tax to that instead of including it in the price as they used to. I guess few enough people pay cash any more that making change with coins doesn't slow down the process too much.
The rise of robust middle classes in Asia have also put a squeeze on the world's chocolate supply in the last decade or two. These days in the US, it's hard to even discern the cocoa in most "chocolate" bars.
What is disgusting with shrinkflation is that it also has an environmental impact. In the end, the same volume/weight will require even more packaging.
Cereal boxes are my favorite example of this. Each year, material scientists at the box factory push the physics of cardboard just a little more so they can increase the aspect ratio of the top panel.
One of my favorite health food cereal brands now offers their stuff in just the plastic bag at a bit of a discount. The environmentally friendly packaging lands on the bottom shelf with the less reputable brands, but whatever.
(I’d prefer it just be in the cardboard with no plastic, but it is still a win).
Why does shrinkflation exist? Are people really fooled by smaller sodas? I think that anyone who believes that doesn't actually drink soda. Anyway, that leads me to believe that there must be some other factor, like maybe some law or contract prevents them from raising prices. Or maybe supermarket shelf space cost is tied to price somehow. Makes you think.
Customers are absolutely fooled by smaller sizes. I've almost fallen for it myself when a coffee package was reduced from 500g to 450. Thankfully I noticed the price per kg was off, but without it I wouldn't have noticed.
This is often done by products using alternative packaging schemes that are meant to evoke personality or authenticity of the food. There are many ‘organic’ brands that sell milk in nonstandard packaging that appears to be a gallon or half gallon but is 10-20% smaller.
A lot of the time shrinkflation makes me seriously look at buying ingredients directly. I can afford to pay extra but, like for example Field Roast recently reduced the size of their sausages from 4oz to 3.2oz each, which is like 300 vs 240 calories, which is enough that I like... can't eat a sausage anymore, it's not enough food. The whole point of having prepackaged food like that is that it's easy to portion out, once they reduce the size sufficiently that a single portion is no longer a portion it makes more sense to buy something else I will portion myself.
The whole purpose of shrinkflation is to prevent yourself from getting into a game of prisoners dilemma with your competitors. You can cut the product size, and therefore costs, and maintain a "competitive price".
You can replace "Walmart" with most large supermarket brands in the western world. Nestlé and Unilever are both European companies and have an even stronger presence in France than in the USA.
These are companies that dominate markets like pet food, infant formula, and personal hygiene products. (Did you forget that you can't make laundry detergent or toothpaste from whole foods?) They are hard to avoid.
And anyway, remarks that are flip about changing consumer behaviors are beyond useless, for ignoring all of the complexity and difficulty in pulling it off. Or are you really giving advice to this educated and privileged audience that doesn't need to hear it because they already know and can?
Eating locally is more carbon intensive and only results in worse food. Long distance shipping doesn't matter at all compared to the last mile, and small producers are less productive than large ones. (Also, small business owners are usually evil, especially if they're farmers, who often end up using slave labor because they can't afford an HR department.)
Luckily, most places that claim to serve local food are just lying.
The good news is that the remaining 10% is pretty well distributed across the things you actually need. If you're completely addicted to Pepsi co brand empty calories you're out of luck but if you're willing to eat actual food there are still plenty of options.
Splitting into two parts so I can get yelled at separately:
2) Money supply is only part of the monetary influence on pricing pressure. velocity also matters - when people are saving stimulus funds, effective monetary stimulus is less than when people are scared and spending to protect against future price hikes
A few years ago local mobile operators decided to create (and heavily market) prepaid plans that charged you a per week flat fee (if you had balance on your account).
Turns out that (for most people) prepaid 3.50€/week mentally equates to 14€/month postpaid, whereas in reality it's closer to 15.20€/month (or an additional 8.7%, plus credit risk).
With Milk so expensive I expect the smaller "gallon" will come out soon. It's already happening to half-gallons, some are at 59 oz now but that's not widespread yet. Alternatives (oat, almond, etc) I think simply started at 54 oz. and never offered full half gallons.
It would be in customers interest for organize products by category, but large AAA brands (Unilever, PepsiCo, Proctor Gamble) often bully shops into brand-designated floor space.
Large supermarkets (Carefour, Intermarche, Ahold Delhaize) bully back by designing their house brand products to look exactly like AAA brands. In France this had led to cat and mouse game changes to colour scheme and shape rebranding.
Shrinkflation stickers are yet another (pretty brilliant) move in the chess game. AAA brands spend fortunes in commercials to guide customers to their product in the supermarket only to have them change their mind last moment in favour of the lower priced freeloader copy-cat.
My dad told me when he was a boy there was a chocolate bar called the "Nickle Bar" that sold for, you guessed it, a nickel. As inflation/deflation changed prices, the Nickle Bar remained costing a nickel, but the size of the bar changed.
Wow if only the State could mandate how much something should cost, and then perhaps the Politburo could meet once every five years to discuss how much of everything should be manufactured, we could regulate our way out of this mess.
You are describing the Chicago Board of Trade. They set depressed prices for farm goods so the middlemen can take a bigger markup without causing civil unrest.
I really love it when stores put the per unit price on their labels (at least they do in California), i.e. $2 per ounce. It would be neat if they can also add a historical graph of those prices to the label.
Yes, thanks. But why they keep selling them? Cannot they "simply"(tm) take them out of the shelves?
Commerical agreements around the corner or fake image of trusty shop?
Anecdotally, I've started to see this with furniture sold at places like Homegoods in the last couple of years. The furniture is smaller but the price is about the same.
Buy items priced by bulk weight to begin with. Meat, vegetables, nuts, also items in standard packaging sizes like milk per liter or gallon. All this processed junk (with its non-standard package sizing) is bad for you anyway.
If someone will start packaging toothpaste in bulk liter sizes, I'll switch to that, and find some kind of more permanent dispenser to fill that looks better in my bathroom anyway.
It amazing to me how much premium “health” food has all the fiber removed and is then loaded with salt and sugar. Those are the main health issues with cheap processed food.
At the same time, finding food that is high fiber, low salt and unsweetened is nearly impossible. Such food is literally made of precursor ingredients and subsets of the stuff added to the unhealthy stuff.
I switched to eating more of the latter, and feel much better in multiple dimensions. Also, most of what I eat now tastes better and is more filling. My weight is slowly going down too.
My current litmus test is that the fiber % daily value should be more than the carbohydrates %DV and the salt %DV should be less than it. I try to buy stuff with zero salt added (I have a nice collection of salty condiments at home already), and no sugar added (though that metric is already being gamed by manufacturers).
Simply avoiding all processed foods would achieve a similar effect, but that eliminates staple foods that are often loaded with salt, sugar or worse (e.g. yogurt, bread, peanut butter) and making them all from scratch is too time consuming.
> finding food that is high fiber, low salt and unsweetened is nearly impossible
I mean, this is pretty much anything in the fresh produce section. Chop it up and eat as a salad, made palatable with a sprinkle of salt (nowhere near as much as what is added to processed food) and a simple homemade vinaigrette (olive oil + vinegar).
> yogurt, bread, peanut butter
You should be able to find relatively healthy versions of each in a store; perhaps you'll need a trip to a health-focused store or Whole Foods, but it should definitely be possible to find plain-nothing-added yogurt, simple sourdough whole wheat bread, and plain-nothing-added peanut butter.
If you as a shopper can track the unit price of what you want to buy, does shrinkflation really matter? For example, if I want to buy a liter of soda, I'll buy a liter's worth regardless of whether the packaging is now smaller.
Usually shrinkflation is more subtle, eg the same size bottle has a spacer on the bottom so it's the same size as the 1l bottle but only holds 900ml. No way to buy 1l at that point, and most people don't memorize the unit prices
This. I witnessed it today. I was running out of washing powder, still keeping the old box (6.5 kg, promotional price 25.95 chf sticker). Went to COOP (CH retailer), again "promotion" of Ariel, same price, but the box is now 4.8 kg.
I don't think that's how liquids are legally able to be marketed, at least in any country I'm aware of. A volume measurement on a bottle/can/etc of liquid — whether a drink, a medicine, windshield-wiper fluid, etc — should always be the volume of liquid you get by pouring the container's contents out into a measuring vessel. No real possibility of / benefit to using slack-fill. If they change the shape of a liquid container, it's for logistics reasons (better packing, less likely to puncture/explode, etc.)
Manufacturers can label it as 900 milliliters so they're not lying, but the bottle looks like it's a liter bottle so the customer doesn't really check the listed amount. They should check though, is my point.
I wish changes like this would also trigger a change in the barcode, that fundamentally by law a new unit size of the same product would be given a new number and that number would be on the receipt. If the number was tokenized like a VIN with sub strings representing volume that could be another way to catch this where the information is tied to data text rather than the physical product whose visuals can deceive when in a rushed shopping event.
Probably not but it would enable that sort of analysis should anyone find a way to easily automate that process someday. It’s one mechanism for feedback that probably not everyone has to do but a few could and their efforts would benefit the wider consumer base I’d imagine. If someone posted that raw data and analysis publicly that would be a website I’d visit from time to time.
Then you’re just tracking the real inflation of the product. Most consumers don’t go through the trouble of looking or remembering what the past unit prices are, so there’s consumer protection advocacy to protect and inform the typical consumer of the downsides of current offerings.
No, the client being to lazy to make uninformed decisions him- or herself is the mess here. Most countries require a price per liter/per kilo anyway, so you always can compare.
And if you can’t, more regulation won’t make that happen, either, see the failed "Nutri Score".
This is a super privileged opinion and wildly out of touch with the less fortunate classes of society.
Also, if you don’t commit to price comparison, how can "shrinkflation" be a problem? If you can buy whatever groceries you want anyway, just buy the ones that make you feel comfortable regarding their price policy...?
This, the concern trolling of corporate apologia is becoming absurd.
“Don’t patronize poor people, of course they are smart enough to remember the ever shifting prices and unit sizes of every product in the marketplace to calculate the real price changes in the goods they are buying.
If you shop often enough, you do start to remember it. I buy a lot of groceries every week and would absolutely notice if things got smaller or the unit price got larger.
which changes all the time with regular price fluctations/discounts/etc
I have noticed e.g. with toilet roll when they decrease the weight they bundle it with a temporary discount so that the unit price remains the same (or even decreases for a bit)
then once the discount ends you've forgotten that they decreased the weight
it's a random walk, with the shrinkflation causing it to go upwards over time
it's the same trick e.g. Google does with Google Workspace, when they want to increase the price they:
- increase regular price, but introduce a new permanent "12 month plan" with the previous price
- six months down the line the 12 month plan is discontinued
then they repeat next time they want to increase the price
In this country, equivalent products on the shelf alternate between listing a price per oz, and a price per lb, to make it more difficult to compare the two.
Try buying a half gallon of ice cream or a proper sized roll of toilet paper. Corporate greed, especially that is intended to cheat the consumer invisibly, always deserves to be called out.
Exactly, there’s a muscle memory and a tangible quantity a package often implies. When the packaging mismatches the quantity it is misleading essentially and wasteful of resources at that point. Think about the shipping angle where packaging is wasted at that point—-basically a smaller package could be used and still allow the transport of the product.
A small bottle or can are usually 330mL (though I think 250 also exists?) so technically they do. It’s usually going to be more expensive per unit tho.
Which is interesting to think about the margins eaten up by packaging vs the product itself. Packaging must be a very small fraction the cost of the product I’m guessing.
I think we should place a QR on every product label, and scanning that QR takes me to data about the product such as its historical mass/volume, cost, and unit price, as well as its brand owner right on up the chain. I see you, Nestle.
Of course, giving customers information to make an informed decision is Bad For Business.
Coming up with unique identifiers for every single specific recognizable product would be an incredible feat, that would have huge impacts beyond this.
Now I'd totally expect a brand to just renew identifiers at random and break any tracking that doesn't help them.
Might be surprising but those are not inherently unique to a product, the maker does whatever they want (if Chupa Chups decide to only ever use 100 barcodes and recycle them across products in time, they can). And they're also not completely unique internationally but I don't remember if there are any namespaces in the first place [edit: EANs are namespaced internationally, but nothing stops a maker from putting random codes if they're not going through standard distribution.]
In this day and age the best you can do is to fight back against business but indirectly benefit some other. In this case an AR app that you wear on say Apple Goggles could benefit from its advanced cameras to ID all this stuff in real time as you walk through the store. Sure it might be weird walking around with those goggles but that will probably become the norm soon. The real winner is Apple though(as they usually tend to be)
Like a barcode? Effectively every product in grocery stores has a UPC on it already.
So you wouldn't need store buy-in, because the challenge here isn't the QR code, it's the place where all that data is maintained. An app could scan the barcode, or you could manually enter the UPC into a website. If you think this is worthwhile, you could build this.
(I am sure that, since this is controlled by manufacturers, they will use this to remove as much information as possible from the actual product labels.)
Spitballing here, but I'm pretty sure stores maintain a local database of their product prices in order to attach them to POSes. My knowledge may be outdated with the advent of things like Square, though...
But it seems to me that, given the fact the stores in the article were the ones supporting the move, that this would be a viable way to track and display price changes over time independent of information manufacturers control. It wouldn't do to pull data from a hostile source.
Really terrible ones, if they think that using data already tracked by the store's internal systems (you know, the database attached to the POS, the one that stores all the pricing data and names, the one you could conceivably track changes in, that database, the one with the pre-labeled data available for one to parse) is something that would genuinely adversely affect business on engineering cost and complexity.
It might be worth thinking for a second about this. You have to link subjectively, not objectively. How do you know a smaller product at the same price should be linked, or not? You don't. Someone has to do that, and over time (should the 4th iteration still be linked through from the 1st, or only from the 3rd, because they're sufficiently different?)
CNN removed the French photo and also introduced a mistake - when they converted "1.5 litres" for US audience they wrote "0.3 gallons" instead of "0.4"
Businesses fail as profits decrease, one cause of which could be higher cost of inputs. It may lead to those businesses cutting costs elsewhere, or passing it onto the consumer. To shame companies as they find ways to maintain profits when they're the first to be affected by increased cost to inputs is economically illiterate and leads to misguided focus on what the cause of inflation affecting all levels before a consumer gets their smaller chips or soda.
Basic economics say that given a certain price, you get a certain demand. And if the price rises, then demand goes down. Consumers don't blindly pay more for things when their prices go up.
In basic microeconomics, taxes, market power, and other market distortions create deadweight loss. Again, the higher price is borne by the consumer, regardless where in the supply chain/production process it is injected. Higher costs can flow through without deadweight loss, but again this is all in the static scenario.
Are you suggesting that people will simply buy more units, at a higher total price? That would be a novel result in economic history.
Local taxes on soda in American cities have demonstrably lowered sales of those drinks, in those jurisdictions. Buyers are sensitive to price. In fact, demand for sugary drinks is highly elastic. A tax of just 1¢/oz in Oakland caused a 27% decline in sales, without countervailing increases of sales in neighboring markets without the tax.
There are substitute goods, but the fact remains that they simply don't have the distribution and marketing that soda has. You can eat a bag of marshmallows but there are no marshmallow vending machines, that I am aware of.
Ease of access is largely irrelevant when people need to eat either way so they can just make larger portions, eat a few extra chips when snacking etc.
Don’t get me wrong obesity does relate to the overall abundance of calories, my point is that singling out soda or candy isn’t going to do much by itself.
There are direct observations of the link between workplace soda availability and waist circumference. You can wave these away as "not long term" I guess, but it's the best evidence available.
The fact they didn’t mention a weight reduction or BMI changes suggests they didn’t observe any changes in weight / BMI.
I’ve looked into this a while ago and while consumption falls no studies showed a change in weight from soda bans. Unless you have something more recent?
> Lmao it’s Oakland. In many cases you can just walk a block to the next city. That doesn’t actually prove anything.
From the PLOS article: "There were no detectable changes in purchases of untaxed beverages or sweet snacks or purchases in border areas surrounding cities."
From the post you replied to: "without countervailing increases of sales in neighboring markets without the tax."
It's imperative to recognize the distinction between 'undetectable' and 'nonexistent.' The mere fact that variations were indiscernible does not negate their existence. Rather, it underscores the diffusion of individuals across diverse channels, which may inherently obfuscate discernible patterns. This does not serve as incontrovertible evidence, but merely a testament to the complexity of data distribution among various outlets.
Even geographically the assertion is nonsense. The fraction of Oakland that lies within walking distance of retail outlets that are not in Oakland is small. Only the far north and far south enjoy this situation.
That's what I thought: governments should actually double tax these products to reduce their consumption. People keep buying despite dark patterns because they're addicted. This is akin to cigars and society later bears the burden of the health issues they cause.
That's all supermarkets. That's kind of the whole point, as margins are better and allows you to negotiate better rates from labelled brands. This is a big reason why Costco is able to outperform it peers.
The secret sauce of costco is the insatiable demand and seemingly exponentially large customer base. You could realistically be waiting 10 mins for gas because people want the ~10% discount so bad. The lines inside to checkout are also huge, another 10-15 min process. Cafeteria lines are just as long. You can hardly find parking in the lot itself because its packed to the brim. Usually its easier to park in a neighboring business.
The only other business I’ve seen with such a constant flow of customers is In n out. Sure its good to have healthy margin but when you are getting 10x the number of daily transactions as your nearest comparable business in the area, you are playing a different game from them entirely.
https://www.imf.org/en/Blogs/Articles/2023/06/26/europes-inf...