Yohana Belinda, Jakarta – More than half of Indonesians say products they regularly buy have been downsized in a phenomenon known as shrinkflation, or the practice of reducing the size of a product while maintaining its price in an effort to conceal the effects of inflation.

Momogi corn sticks, for example, a popular snack since the early 2000s, formerly weighed 14 grams per packet but are now only 5 g after having been reduced in size several times. Their price remains around Rp 500, a fact that has sparked online debate.

Hari Kurniawan, who owns the Loemintoe bakery supply store in Senen Market in Central Jakarta, said it was sometimes necessary for his suppliers to reduce the content of a product to maintain the quality without increasing the price.

Speaking to The Jakarta Post on Wednesday, he added that many of his customers were owners of small and medium enterprises and that they might look elsewhere if the price tag changed.

In order to match the preferences and budget of different store owners, he added, he carried a variety of brands to offer similar goods at different price levels.

Hari said product sales had not been substantially impacted by shrinkflation, drawing from his experience selling basic pastry goods. He claimed that the quality of products was of greater importance to small business owners.

"Producers [Hari's suppliers] must compete with numerous smaller competitors who offer cheaper and smaller products, leading many to downsize the products they sell," he said. "There will always be a market for people who eventually opt for a smaller-sized product."

Santi, who has 30 years of experience selling baking goods at the same market and opted to use a pseudonym for this report, said shrinkflation was an effective strategy for sustaining consistent sales.

"From a business perspective, the reduction in product size does not seem to be impacting sales. From a consumer perspective, purchasing a product like cocoa powder that has decreased in quantity from 100 g to 80 g may lead to increased spending over time," Santi told the Post on Wednesday.

Indonesian Food and Beverage Producers Association (Gapmmi) chairman Adhi Lukman defended the practice, arguing that brands were facing the challenge of maintaining affordable prices for consumers amid rising costs of production, noting that the prices of energy, basic materials and logistics were rising.

"In conventional markets, there is a concept known as the 'magic price'. As an illustration, the seller initially prices the item at 500, then raises it to 1,000 and eventually to 1,500. This significant increase may impact sales negatively, prompting them to maintain a fixed price but reduce the size," Adhi said, while acknowledging that consumers had engaged in a debate about shrinkflation.

A worldwide survey published by United States-based market research firm Ipsos in November 2023 found that 58 percent of Indonesians had noticed a reduction in the size of the products they regularly bought.

Savory snacks were found to be most affected by shrinkflation, with 45 percent of survey respondents noticing a size decrease, followed by chocolate with 44 percent.

Some 56 percent of respondents found it acceptable for brands to decrease product sizes to keep prices constant.

Given the debate about shrinkflation, Adhi emphasized transparency so as to maintain customers' trust.

"To ensure customer satisfaction, we will keep our customers informed about any changes we implement," he told the Post on Feb. 19.

Entrepreneur Leonard Hartono, who founded The Overpost platform, which focuses on financial literacy in Indonesia, said producers needed to protect their brands by not compromising on quality to ensure customer retention, even during times of rising costs.

While both shrinkflation and price hikes were ways to pass increased raw material and labor costs on to consumers, the priority was to strike a balance between quality and price.

"To pass on higher input costs, brands can either raise prices or reduce volumes, which is shrinkflation. Either strategy lets brands pass on higher input costs to customers, but the latter is simpler because people tend to be more price sensitive and less sensitive to a gradual change in size," Leonard said, noting that it was important to adapt to consumers' budgets.

Adhi said overall purchasing power for fast-moving consumer goods appeared to be rising, but so were ingredient prices, leaving producers with limited options to respond. He pointed out that there were also legal restrictions on packaging sizes that made it challenging for producers to set balanced prices amid inflation.

"I believe that the government should review these regulations, as they could prevent companies from creating products that cater to the purchasing power of the average consumer," Adhi said.

Source: https://asianews.network/shrinkflation-takes-edge-off-rising-prices-indonesian-manufacturers-say