Now, here’s something you can do to understand how absurd inflation, better yet – shrinkflation, has become. Order Chipotle (NYSE:CMG) for lunch. Seriously. If you’re hungry, order a burrito. Today, I ordered a beef brisket burrito. Of course, I threw every condiment they had on top of it. And when it arrived at my house, not only had I paid an extra $1 for what I bought last year… I also got a burrito about 85% of the size of the one I purchased a year ago.
You see, prices aren’t just going up. But the products are getting smaller. It was noticeable in this burrito – which was delicious, by the way – and now I’m still hungry. Typically, it would take me a specific amount of time to eat Chipotle. There was a ritual. But I noticed that it was a faster lunch, which I suppose I can thank them for saving me two extra minutes to my day?
Getting less for more is known as “shrinkflation.” You can see it in the packaging of everything that you’re buying today. The Doritos bag is a little lighter. I noticed that the $1.29 bag that increased to $1.59 dropped its contents by about a half-ounce. The box of cereal is getting smaller. General Mills cut its “Family Size” boxes from 19.3 ounces down to 18.1 ounces. The bottled drinks are getting slimmer.
Did you notice? Yes, less for more. Shrinkflation is an evil cousin of inflation. Downsizing is a sneaky way to increase prices on Americans. It’s easier to tell when prices are going up when the gallon of milk goes from $3.49 to $4.29 in a year. It’s easy to notice when the candy bar goes from $0.99 to $1.49. But packaging? You don’t notice the slowness of the process.
But that’s not the only thing that companies do. So yes, I got a smaller burrito today. And yes, I quickly noticed. Still, I recognize that the company has higher input costs for food as well. So, they have to do something else.
Less for More
Chipotle is being smart. For a “limited time,” they are charging an extra $2.00 for a cheaper product than steak – it just takes a little longer to cook. A beef brisket taco. It feels like a delicacy. It’s honestly a clever marketing trick. And it will help boost their margins and help push them through the inflationary quarters and protect their shareholder interests.
You’ll notice right now that the McRib is back at McDonald’s right now. This is because pork prices are low right now compared to chicken, beef, and other meat products… so a special product with a special marketing message that offers a nice marginal bump will make shareholders happy.
It’s that simple… It’s good for the trader. It’s good for the investor. Unfortunately, I’m not sure that the consumers know the same. I’ll follow up with more on this trend very soon.