Shrinkflation: Is It a Good Cash Management Strategy to Use?

By Gene Marks
The Hartford Small Biz Ahead | Originally published: February 21, 2024

Key Podcast Highlights

What Is Shrinkflation?

• Shrinkflation is where you sell something for the same price but you sell a little bit less of it. Some of the largest brands in the country are doing this right now. One example of this strategy would be selling two meatballs with a pasta dinner instead of three but for the same price as before.

Why Use Shrinkflation?

• Companies choose this cash management strategy because it can help maintain margins.
• You first need to look at all your products and services that you’re delivering and then ask yourself if it’s possible to deliver a little bit less.

Podcast Transcript

The views and opinions expressed on this podcast are for informational purposes only, and solely those of the podcast participants, contributors, and guests, and do not constitute an endorsement by or necessarily represent the views of The Hartford or its affiliates.

Gene (00:01):

Hey everybody, it’s Gene Marks and welcome to the Hartford Small Biz Ahead podcast. Thank you so much for joining me. This week, I wanna talk to you about a little cash management strategy. Particularly these times of, well, higher inflation obviously, certainly higher costs. We’re trying to maintain our overhead. For many of us we’re facing a sluggish economy or sluggish demand. And obviously every penny counts. And people, people are often asking like how do we get by? Should we, can we get away with raising prices again in this inflationary environment? And I think you will agree that, most companies did raise prices over the past couple years as inflation, was what it was. But now that inflation has been brought a bit under control, less companies are using that as a strategy.

Gene (00:48):

Even though we are still facing higher costs of production. I mean, typical materials cost. I mean, if you’re running a restaurant or you’re running a even a B2B like a manufacturing, and you look at your, your cost of labor and utilities and core materials in your products, the cost of food, the cost of rent, they’re all up way more than double digits in just the past two to three years. So we still need to do something to maintain our margins. It’s all about maintaining our margins. Now, there are a lot of different strategies that people use to do this to, to keep your margins high. And remember, your margin is whatever your sales revenue is, less your cost of sale, your direct cost of sale, your materials and labor to, to make or produce that item.

Gene (01:33):

That’s your margin, right? You gotta maintain them. Well, one strategy that has been successful for a lot of companies is, believe it or not, something called shrinkflation. Have you ever heard of what shrinkflation is? Shrinkflation is where you sell something for the same price, but just a little bit less of it. Now, that might sound a little unethical or immoral, but it’s not, because some of the largest brands in the country are doing that right now. There are reports and you can Google these all over the place. Some different news sites. I pulled just a few example. Walmart sells great value paper towels. They used to include 168 sheets in a roll of these paper towels. Now there’s only 120 sheets in that roll, but they’re charging the same price for those paper towels. If you wanna buy a bag of Doritos, a bag of Doritos used to be 9.75 ounces. Now it’s 9.25 ounces, same bag, same price, but just a little bit less, a little bit less cost of materials. Charmin toilet paper, if you really want to get down to it. It originally had 650 sheets of per roll. Now it only contains half of that, even their mega rolls, that their super mega rolls….

Gene (02:59):

Don’t have as many sheets as the original because again, they’re charging the same price, but they’re delivering less product. If you go and buy hefty trash bags, their megapack used to be 90 bags, now it’s 80 bags at the same price. Domino’s is putting fewer chicken wings in its carry out baskets. And I dunno who’s getting chicken wings from Domino’s guys? I mean, isn’t it a pizza place, whatever, they’re putting fewer chicken wings in there for the same price. If you go to Burger King, you’re only getting eight nuggets now instead of 10, but it’s still the same price. Do you understand what I’m saying? Shrinkflation is happening all over the place. Go to a typical hotel. It used to be that you would get your room serviced every day or towels or chairs would be included at the pool, but now you’ve gotta pay either a resort fee or they’re just not included…[MORE]

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To read the entire transcript or listen to the podcast by Gene Marks, visit The Hartford Small Biz Ahead website: Shrinkflation: Is It a Good Cash Management Strategy to Use?