How manufacturers shortchange Nigerian consumers
With rising inflation and production costs, most firms are tactfully reducing the contents of their products in order to maximise profits. However, the consumers and the government must stand up against the practice, writes EDIDIONG IKPOTO
Dipo Alabi, a Lagos-based car dealer, had developed a habit of getting his twin sons’ favourite peanut brand as part of their snack pack every morning. On this occasion, however, he opted not to do that. According to him, his meticulous sons, Taiwo and Kehinde, were convinced that the quantity inside its pack had shrunk significantly and therefore were reappraising their support for the brand.
“My sons learnt how to count with this peanut. So, they know. If they tell me it has reduced, then it has reduced,” Alabi said.
They were not the only ones. Eunice Nwankwo, a groceries trader, was also certain that manufacturers were using different downsizing tactics.
While demonstrating her point to our correspondent with some bleach containers, she said, “If you look at this bleach container, it is a bit smaller and even thicker than the old one. The size is almost the same. In fact, you may not even notice it from the size of the container. But this one is thicker, so the quantity of bleach inside it is smaller than this other one.”
According to the latest figures by the National Bureau of Statistics, Nigeria’s inflation again increased in the month of July to 19.64 per cent, indicating a 17-year high. Industry experts believe that packet tweaking seen in most products in the market may not be unconnected with desperate measures by manufacturers to control costs due to the current inflationary pressure and other elements putting serious constraints on manufacturing activities.
Product downsizing, sometimes referred to as “shrinkflation”, occurs when items such as peanuts or chips begin to shrink in size or quantity — or both — due to rising costs.
It is the practice of reducing the size of a product while maintaining or sometimes even increasing its price. Raising the price per given amount is a strategy employed by companies, mainly in the food and beverage industries, to clandestinely maintain or increase profit margins, especially in times of skyrocketing costs.
In business and academic research, shrinkflation is usually associated with a macroeconomic situation where the economy experiences varying degrees of contractions, which may be largely characterised by rising price levels.
According to Investopedia, shrinkflation is basically a form of hidden inflation. Companies are aware that customers will likely spot product price increases and so opt to reduce the size of them instead, mindful that minimal shrinkage will probably go unnoticed. More money is squeezed out not by lifting prices but by charging the same amount for packages containing a little bit less.
Because research has shown that consumers are more sensitive to outright price increases than package downsizing, most manufacturing firms often feel more comfortable doing size tweaking rather than increase prices explicitly. In some cases where the economic condition bites incredibly hard, they may do both (price increase and packet downsizing).
However, this practice can result in negative consumer brand perceptions and intentions to repurchase the products, and to static or declining unit sales volumes over time, experts say.
Most consumers do not usually scrutinise the size of products. Indeed, sometimes, when the size decrease is minimal, it is difficult to tell even by the sharpest of eyes. Someone who loves potato chips, for instance, may not realise if a favorite brand reduces the size of the packet by 5 per cent, but will certainly be able to tell and even rally against it when the price goes up by the same amount.
From a company perspective, shrinkflation is a useful way to boost or maintain profit margins without drawing too much attention. This is in part due to skyrocketing production costs on one hand, while on the other hand may be as a strategy to stay in the competition. In some cases, when the price of a product continues to go up, consumers may be forced to consider other brands with cheaper alternatives.
One of the best ways to notice shrinkflation is by looking out for a redesign on the packaging or a new slogan. This is usually a pointer to the fact that the company has made a change, which, in most cases is usually the size, analysts say.
Consumers can also look at the price per unit to see if there has been a change. The difficulty here is that it may be difficult to remember the prior price per unit, but comparing price per unit to different products can help shoppers get the best deal.
A good way to avoid shrinkflation is by buying competing brands. This is because competing brands may not yet have downsized, and this enables buyers to get more value for their money. Opting for store brands rather than name brands also helps. Store brands are generally cheaper than name brands.
More importantly, learning the net weights of products and their prices will help the consumer to notice when a company has downsized the contents of its product.
Kelechi Nnamdi, a Lagos-based wholesale trader who sells groceries to retailers, believed shrinkflation had always been a permanent feature in the Nigerian markets, but was usually more perceivable during periods of acute economic austerity.
According to him, manufacturers would often exploit the fact that consumers most at times would not critically examine quantities with a high degree of precision.
“The thing is, this thing did not start today. From time to time, if you check very well you will notice that some products begin to reduce in size. The reduction is done very carefully. So, if you don’t check very well you won’t notice it. Many of my distributors come to tell me that some of their customers are complaining. It’s more common with sachet products like chin chin, biscuits and other snacks.
“Some customers notice it, but many of them do not. Many of them just buy and open it at once. They don’t even have time to check. We who are selling, we are caught in the middle, so even when we notice it, there is nothing we can do about it. I’ve been in this business for nine years so I can tell you that no matter how you complain, the manufacturers will tell you stories about how difficult it is for them.”
Due to Nigeria’s current economic crunch, consumers are not only contending with shrinkflation within the context of packet downsizing alone, they are also contending with brazen price hikes that have seen many products increase by more than 200 per cent within the past two years. They have also contended with packets shrinking alongside aggressive price hikes which stare down the barrel of a hostile marketplace that is fleecing buyers to pay more money for less quantity.
Products commonly prone to shrinkflation include: toilet rolls, cookies, chips, tubed conditioners, toothpastes.
For example, a company’s soft toilet paper (18-count mega package) now contains 244 two-ply sheets, down from a previous 264 double-ply sheets per roll. And super mega rolls of the brand now display 366 sheets versus a previous 396 sheets per roll.
In its most recent earnings call, the company’s executives acknowledged it was facing a “challenging cost environment” following lingering effects of the pandemic on supply chains, a tight labor market and as “availability of materials remains stretched.”
Consequently, it announced that it was increasing prices to its retail customers for 10 product categories, including detergents, dryer sheets, baby and feminine care products.
Speaking exclusively with The PUNCH, a professor of Economics at Covenant University, Ota, Jonathan Aremu, said many of the inadequacies by manufacturing firms with regard to not delivering the right quantity and quality to consumers stemmed from docile attitude of Nigerian consumers who often would not make use of the legal apparatuses that had been set up to ensure consumer protection.
Aremu said, “At the national level, we have the consumer protection office. Therefore, if such a thing happens, it should be reported. We have the Standards Organisation of Nigeria also. More importantly is the fact that when the product is beyond what should be purchased in Nigeria, then we can use the standard of the World Trade Organisation, WTO.
“It is now within the prerogative of the consumer to actually observe and report cheating or wrong packaging to the relevant national and international agencies, but if we do not do that and then we are just complaining, that’s unfortunate.”
According to the former Assistant Head of Research at the Central Bank of Nigeria, the decision by a brand to remodel its products and make them smaller might not necessarily be traced to the current economic situation in the country.
He added, “I wouldn’t say that at all. These are just rumours. Have they been proved? That is not a scientific argument.”
An economic analyst, Ike Ibeabuchi, noted that it was unjustifiable to attribute cheating by manufacturers to the state of an economy.
“If you do most of those things in the USA or the UK, the firm will be hit with sanctions. It is unethical, but our regulators must sit up, and consumers must also complain.”