Shrinkflation: New Requirements Starting July 1st to Inform Consumers

Starting July 1, 2024, retailers will be required to inform consumers of any price increases for products that have undergone a reduction in quantity, following a ministerial decree published on May 4.

Briefly
Starting July 1, 2024, new regulations will require retailers to inform consumers when the quantity of a product decreases but its price remains the same or increases. This measure aims to combat 'shrinkflation,' a practice where the quantity of a product is reduced while its price is maintained or increased, making cost increases less noticeable to consumers. In response to rampant inflation and rising production costs, manufacturers have turned to shrinkflation to maintain their margins. This enhanced transparency is intended to restore consumer trust.

Key Takeaways

• Effective Date: July 1, 2024
• Disclosure Requirement: Information must be displayed close to the affected products
• Duration of Display: Two months following the product's release
• Penalties: Fines up to €3,000 for individuals and up to €5,000 for businesses
• Scope: Applies to large and medium-sized stores (>400 m²)

Analysis and Breakdown
Increased Transparency: This measure aims to restore consumer trust by ensuring complete transparency regarding price and quantity changes of products. By requiring retailers to clearly disclose reductions in quantity and price increases, consumers will be better equipped to make informed choices.
Impact on Business Practices: Retailers will need to review and adapt their labeling and displays. This requirement might encourage companies to rethink their pricing strategies to avoid having to report price increases that could deter consumers.
Effects on Margins: Producers and retailers will need to find a balance between transparency and profitability. This enforced transparency may compel them to optimize their internal processes and value chain to absorb costs without routinely resorting to shrinkflation.
Consumer Trust: By increasing transparency, authorities hope to restore trust often eroded by practices perceived as deceptive. This trust is crucial for maintaining a healthy relationship between consumers and retailers.
Business Opportunity: The new regulation presents an opportunity for industry players to stand out through transparency and commitment to consumers. In a context where price is a key factor in decision-making, companies that quickly adopt these practices may enhance their brand image and gain consumer trust.

Consumer Insight
For consumers, this measure means better information and an increased ability to make informed choices. They will now be able to more easily compare prices based on actual quantities and detect disguised price increases, which could lead to more rational purchasing behavior. However, it will also add a new mandatory element to packaging, making product labels more complex to read.

Conclusion
The new regulation on shrinkflation represents a significant step toward greater transparency in the retail sector. F&B professionals need to prepare for these changes by adapting their labeling practices and implementing strategies to clearly inform consumers. While this regulation primarily applies to retail products aimed at direct consumers, it may be worthwhile to extend these obligations to producers and distributors who supply restaurants. This would ensure similar transparency throughout the entire F&B supply chain, contributing to a fairer and more transparent business environment for all stakeholders.

Alice P