No one admits to shrinkflation these days. But firms are rebranding it
Save time by listening to our audio articles as you multitaskIn rich countries, producer prices are surging at their fastest rate in 40 years. That sounds bad. On the ground some say it feels awful. Thierry Piéton, chief financial officer of Renault, said the French carmaker initially predicted raw-material costs would double this year. Now it thinks they will triple. Elon Musk says Tesla’s suppliers are requesting 20-30% increases in parts for electric cars compared to this time last year.
In some cases, as Mark Schneider, boss of Nestlé, the world’s biggest food company, puts it, the public understands that “something has to give.” War, after all, is on the, and the pandemic is still fresh in people’s minds. Inflation is less alien by the day. In other cases, pricing is done more sneakily: offering premium products to those who are still able to splash out, or cutting costs for those for whom affordability is the overriding concern. Many of the biggest firms do both.
Such firms benefit from another factor associated with brand power: premiumisation, or their ability to raise the cost of already pricey products. The trend appears to be holding fast. In Nestlé’s case there are, as yet, few signs that well-heeled consumers are trading down from, say, Nespresso pods to Starbucks capsules to spoonfuls of Nescafé.
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