What does the term 'shrinkflation' refer to in economic practices?

Shrinkflation refers specifically to the practice of reducing the amount or volume of a product while maintaining the same price. This tactic is often used by companies as a way to manage rising production costs without overtly increasing prices, which might deter consumers or lead to negative perceptions about a brand. By keeping the price stable, businesses aim to avoid the backlash that can accompany visible price hikes, all while customers gradually receive less product for their money.

The focus on maintaining a consistent price despite reducing the quantity emphasizes a strategic adjustment that can obscure the actual increase in cost per unit for consumers. This phenomenon can also lead to consumers being unaware of the decrease in product size, as packaging might remain visually similar, thereby not immediately drawing attention to the change.