As global costs skyrocket, Japan’s “shrinkflation” becomes harder to swallow
It’s a chocolate cookie that made Masayuki Iwasa, a self-proclaimed penny pincher with a sweet tooth, one of Japan’s most scrupulous chroniclers of “retraction.”
After giving up his favorite Chocoliere tarts a decade after Bourbon Corp. reduced the size of the package, the part-time newspaper deliveryman and securities trader was prompted for action about two years ago after noticing the cookies had gotten smaller as well.
“I was annoyed that they were falling more and more,” said Iwasa, 45, whose website, www.neage.jp (price increases), documents surreptitious price increases.
Today, it tracks the prices of some 400 goods and services, from laundry to day passes to Tokyo Disneyland. Most of their website is devoted to what’s called shrinkage, when a product gets smaller but the price stays the same.
“In Japan, the impact of deflation means it’s difficult to raise prices directly, so shrinkage is kind of a measure of last resort,” Iwasa said. “But basically it’s sneaky and it bothers me.”
While this practice is not unique to Japan – Mondelez International Inc. sparked a global uproar when it downsized the Toblerone chocolate bar in 2016 – its prevalence in the world’s third-largest economy is a notable legacy of years. deflation.
Because consumer prices and wages have barely budged over the past two decades, businesses have become reluctant to raise prices for fear of losing customers.
It’s a headache for policymakers, who ultimately want to see higher prices which are an essential component of a virtuous spending cycle that spurs economic growth, especially as the population ages and decreases.
There are now signs that even Japan Inc. could approach a tipping point, as soaring raw material costs and a weak yen push up what companies pay for fuel, coffee beans and beef. .
While only 14% of Japanese companies have so far passed on higher costs to their customers, 40% say they plan to do so, according to a recent Reuters poll.
Still, food companies are among the least willing to pass on costs, the survey showed, reflecting their fear of alienating buyers.
“As the price of raw materials increases, food manufacturers would like to increase the prices but it is difficult for them to do so,” said Tsutomu Watanabe, professor of economics at the University of Tokyo.
Watanabe said many companies would be reluctant to raise prices, as they did in 2008 during another commodity boom and in 2013-2014 when the yen weakened sharply, making shrinkage unknown. one of the few ways to protect margins.
In 2008, Bourbon reduced the number of Chocoliere cookies in a ¥ 150 ($ 1.30) pack from 16 to 14, citing higher costs, according to the Iwasa website, which uses the company’s ads. , Internet archives and other public information to track prices.
Bourbon then shaved just under a gram of each of the confectionery, reducing the packet size to 110.6 grams from 122.5 grams.
The company did not respond to requests for comment.
Kameda Seika Co. came under criticism this year after reducing the contents of the packages of its Kaki Pi rice cracker and peanut mix from 5% to 190 grams.
The size was reduced because Kameda could no longer offset rising commodity and transportation costs with a belt tightening elsewhere, a spokesperson said.
Calbee Inc. has announced that it will reduce the content of some of its Jagarico potato chips and sticks by about 5% starting next month. Separately, it will increase the prices of more than a dozen potato chips by up to 10%.
The snack maker has received more negative comments from customers about the drop than the rise in prices, spokesman Satoshi Yoshida said.
“There may be clients who have had such a negative experience that they have felt cheated and have bad memories of it,” he said.
Lotte Co. was criticized when it announced the renewal of its Bacchus chocolates in Japan last year, not to mention that it had cut the package from 12 to 10, according to articles online.
Spokesman Yuichi Nitanai confirmed the reduction but declined to comment further.
The government’s official consumer price index takes into account the small size of packaging, said an interior ministry official, which compiles the index.
But the impact of shrinkage may not be fully reflected in this data, as the government index tends to use big brands, while shrinkage is more prevalent in lesser-known companies, said Watanabe of the ‘University of Tokyo.
“Big companies have a certain pride and don’t want to be seen doing something that looks unattractive like shrinkage,” he said.
In a time of both disinformation and too much information, quality journalism is more crucial than ever.
By subscribing you can help us tell the story right.