Shrinkflation: Philippines trade department okays downsizing of key goods

Manufacturers also have to prove that reducing the content or weight and selling these products at the same price was justified based on higher production costs, according to Department of Trade and Industry.

Alden M. Monzon, Melvin Gascon

Alden M. Monzon, Melvin Gascon

Philippine Daily Inquirer


File photo of the logo of the Department of Trade and Industry. PHOTO: PHILIPPINE DAILY INQUIRER

January 18, 2024

MANILA – Instead of increasing prices, the Department of Trade and Industry (DTI) on Wednesday said that it has permitted manufacturers of basic necessities and prime commodities to instead reduce the size or weight of their products to cope with rising production costs and remain profitable.

Trade Assistant Secretary Amanda Marie Nograles, head of the DTI’s consumer protection group, said during the televised Bangon Pilipinas briefing that the agency allowed some items in its list of monitored consumer products to “shrink” but only after manufacturers met certain conditions that the DTI had imposed.

“First, we have checked their packaging which should reflect the new weight following the reduction of contents. So if there has been a decrease in ‘grammage’ and the new weight is reflected in the packaging, that’s a check,” she said.

Manufacturers also have to prove that reducing the content or weight and selling these products at the same price was justified based on higher production costs, Nograles added.

“Third, because this is effectively a price increase, we also have to check whether the profit [manufacturers] derived from the sale of their reduced product would fall as profiteering, which is a violation of the Price Act,” she said.

“The manufacturers have produced all the needed documents to justify their reduced product, so that is okay, and we have already issued our approval of that because it does not violate the law based on the [established methods of] computation,” Nograles noted.

The official made the statement in response to complaints from consumers who have observed the shrinking of some basic commodities, which is supposedly a way by which manufacturers circumvent Republic Act No. 7851, or the Price Act.

Under the law, the DTI is empowered to issue “suggested reasonable retail prices” for any or all necessities and prime commodities under the agency’s jurisdiction.

A Price Coordinating Council, an interagency body chaired by the trade secretary, is also mandated to put in place programs to stabilize prices for such basic commodities.

According to Nograles, the DTI was well aware of shrinkflation among local products, prompting them to undertake a threefold test on whether they would allow it.

Pending requests

The last few years have been challenging for manufacturers, absorbing higher input costs due to supply chain challenges caused by the COVID-19 pandemic and the Russia-Ukraine war.

The resulting high inflation has prompted them to seek price increases or to downsize their products to stay in the black amid rising costs.

Referred to as shrinkflation, this strategy by manufacturers of keeping the same price for a lesser product avoids price hikes that may force buyers to shift to competing products.

“Our manufacturers always blame the increase in the price of raw materials, which are commonly imported, and because the raw materials of a product are imported, it is affected by the movement of prices in the world market,” Nograles explained.

In the latest suggested retail price (SRP) bulletin released by the DTI on Wednesday, it noted that only nine items covering different coffee and salt products had their prices increased or their contents reduced.

However, consumers should brace for more price—or product size—adjustments in the coming months.

The trade official noted that they were still assessing 54 notifications for price increases or product size reductions submitted by manufacturers of consumer goods.

About two weeks ago, Nograles said that there were pending price increase petitions from makers of sardines, processed milk, bread, instant noodles, bottled water, processed canned meat and beef, and condiments.

She said that manufacturers of toilet soap, candles, and batteries have also submitted petitions to raise prices.

“But their approval is not likely to be issued immediately because discussions and evaluation by the DTI are still ongoing, so there’s no assurance yet if these will be approved,” Nograles pointed out.

Cheaper alternatives

She said that they would again release in March an update to the SRP bulletin, which serves as a buying guide to consumers. In the latest SRP bulletin, three stock-keeping units (SKUs) of coffee and six SKUs of salt were affected. An SKU is a technical term used by stores to identify and categorize specific inventories by brand, product type, and weight.

“For coffee, the SKUs with adjusted prices reflected a reduction in weight with either decrease in price or no change in price,” Nograles later told reporters.

In particular, Nescafe was among the two brands reflecting the changes, with a 25-gram pack of its classic blend that costs P21.50 getting its content reduced to 23 grams and its price to P20. Meanwhile, a 50-gram pack of the same Nescafe classic which costs P43.25 had its weight decreased to 46 grams and its price to P40.

Lastly, a 20-gram Blend 45 that costs P4.10 got its weight reduced to 18 grams with no price change.

“For salt, the SKUs increased by only 4 percent,” according to Nograles.

She highlighted that the prices for these two food items were last adjusted in 2018 and 2022, respectively.

The trade official advised consumers that they still have the option to choose cheaper products considering that 154, or 71 percent, of the SKUs in the SRP bulletin have so far retained their prices.

“For instance, there are three brands of three-in-one coffee that are seen to increase their prices, so consumers still have nine other brands to choose from,” Nograles said.

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