As global costs soar, Japan's 'shrinkflation' gets harder to swallow
05/12/2021 23:00
(Repeats story first published Friday; no change to text)
* Shrinkflation is when a product gets smaller but the price
stays
the same
* Shrinkflation is notable legacy of Japan's years of
deflation
* Many companies will balk at price hikes despite margin
pressures
- academic
By Kantaro Komiya and Daniel Leussink
TOKYO, Dec 3 (Reuters) - It was a chocolate biscuit that
turned Masayuki Iwasa, a self-professed penny-pincher with a
sweet tooth, into one of Japan's most scrupulous chroniclers of
"shrinkflation".
Having sworn off his favourite Chocoliere tartlets for a
decade after Bourbon Corp 2208.T reduced the package size, the
newspaper delivery man and part-time stock trader was spurred to
action around two years ago after he noticed the biscuits had
also gotten smaller.
"I was annoyed they were shrinking and shrinking," said the
45-year-old Iwasa, whose website, www.neage.jp (price
increases), documents surreptitious price hikes.
Today he tracks prices of some 400 goods and services -
everything from washing powder to day passes at Tokyo
Disneyland. The bulk of his website is devoted to so-called
shrinkflation, when a product gets smaller but the price stays
the same.
"In Japan, the impact of deflation means it is difficult to
raise prices directly, so shrinkflation is a kind of a measure
of last resort," Iwasa said. "But basically it's sneaky and it
bothers me."
While the practice is hardly unique to Japan - Mondelez
International Inc MDLZ.O sparked a global outcry when it
reduced https://www.reuters.com/article/us-britain-toblerone-idUSKBN1331L6
the size of the Toblerone chocolate bar in 2016 - its
prevalence in the world's No.3 economy is a notable legacy of
years of deflation.
Because consumer prices and wages barely budged for the last
two decades, companies have become reluctant to increase prices
for fear of losing customers.
That's a headache for policymakers, who ultimately want to
see higher prices that are an essential component to a virtuous
spending cycle that drives economic growth, especially as the
population ages and declines.
There are now signs that even Japan Inc may be nearing a
tipping point, as soaring raw material costs and a weak yen
drive up what companies pay for fuel, coffee beans and beef https://www.reuters.com/article/japan-economy-inflation-idCAKBN2H402I.
While only 14% of Japanese firms have so far passed on
higher costs to customers, another 40% say they plan to, a
recent Reuters poll showed https://www.reuters.com/world/asia-pacific/around-half-japan-firms-looking-pass-rising-commodity-costs-customers-2021-11-10.
Yet food companies are among the least willing to pass on
costs, the survey showed, reflecting their fear of alienating
shoppers.
"As the price of raw materials increases, food manufacturers
would like to raise prices but it is difficult for them to do
that," said Tsutomu Watanabe, an economics professor at the
University of Tokyo.
Watanabe said many companies will balk at outright price
increases, just as they did in 2008 during another commodities
surge and in 2013-2014 when the yen weakened sharply, leaving
shrinkflation as one of the few ways to protect margins.
CONSUMER BACKLASH
In 2008, Bourbon cut the number of Chocoliere biscuits in a
150 yen ($1.30) packet to 14 from 16, citing higher costs,
according to Iwasa's website, which uses company announcements,
internet archives and other public information to track prices.
Bourbon later shaved just under a gram off each of the
confections, reducing the packet size to 110.6 grams from 122.5
grams.
The company did not respond to requests for comment.
Kameda Seika Co 2220.T was hit with criticism this year
after it reduced the contents of packages of its "kaki pi" rice
cracker and peanut mix by 5% to 190 grams.
The size was cut because Kameda could no longer offset
rising commodity and transport costs with belt-tightening
elsewhere, a spokesperson told Reuters.
Calbee Inc 2229.T said it will reduce the contents of some
of its potato chips and Jagarico potato sticks by about 5% from
next month. Separately, it will raise prices of more than a
dozen potato chip products by up to 10%.
The snack maker received more negative feedback from
customers over the shrinkage than the price hikes, said
spokesperson Satoshi Yoshida.
"There may be customers who have had such a negative
experience in which they felt deceived and have a bad memory of
it," he said.
Lotte Co was criticised when it announced a renewal of its
Bacchus chocolates in Japan last year, without mentioning it had
cut the package to 10 pieces from 12, according to posts online.
Spokesperson Yuichi Nitanai confirmed the reduction but
declined to comment further.
The government's official consumer price index takes into
account reduced package sizes, said an official at the Ministry
of Internal Affairs, which compiles the index.
But the impact of shrinkflation may still not be fully
reflected in that data because the government index tends to use
leading brands, whereas shrinkflation is more prevalent at
lesser known companies, said University of Tokyo's Watanabe.
"Top firms have a certain amount of pride and don't want to
be seen doing something that looks unattractive such as
shrinkflation," he said.
($1 = 113.3900 yen)
(Reporting by Kantaro Komiya and Daniel Leussink; Editing by
David Dolan and Lincoln Feast.)
((daniel.leussink@thomsonreuters.com; Twitter:
@danielleussink;))