Yi Whan-woo is a Korea Times journalist primarily covering finance. He writes in-depth articles on macroeconomy and financial markets and previously covered sports, politics, diplomacy and inter-Korean affairs, among others. Feel free to contact him at yistory@koreatimes.co.kr.
Gov't price interventions heighten concerns over deceptive sales practices
Meal kits are on display at a supermarket in Seoul, Monday. Yonhap
By Yi Whan-woo
The government’s push to curb food prices by twisting the arms of manufacturers appears to have backfired, as embattled manufacturers are passing on the extra costs to customers through a series of deceptive sales campaigns, thus undermining the inflation fight.
The campaigns have been described as “shrinkflation,” “skimflation” and “bundle-flation” — all cost-cutting measures in the form of a loss of quality or quantity in products.
A number of food manufacturers adopted “shrinkflation” techniques that reduce the size of a product but keep the price the same, following the government’s scheme to keep prices of major grocery items under control in early November.
The scheme was noteworthy for putting the vice ministers of all ministries in charge of monitoring the prices of goods.
The measure was intended to stabilize people’s livelihoods, as inflation, after easing to a 25-month low of 2.3 percent in July, resurged thereafter for three months straight — 3.4 percent in August, 3.7 percent in September and 3.8 percent in October.
In particular, prices of staple food products, including instant noodles, bread, cookies, coffee, ice cream, sugar and milk, climbed more than 5 percent in the first 10 months this year. The trend is most likely to continue throughout the remainder of 2023.
“Under the circumstances, ‘shrinkflation’ can be said to be a cunning business practice that avoids a price hike that would draw the ire of customers, but in fact burdens consumers by passing on costs to ensure profit,” said Citizens’ Coalition for Economic Justice, a civic activist group. “In that regard, ‘shrinkflation’ rather complicates the government’s bid to tame inflation.”
The government said it is aware of the practice and it is working on countermeasures, which it said will be unveiled in early December.
But it remains a step behind food manufacturers employing “skimflation,” in which companies, while keeping prices the same, reduce the quality of their products by using inferior ingredients or cheaper manufacturing methods or materials.
Additionally, some companies are deceiving customers with “bundle-flation,” that exploits a belief that items in a single, combined bundle are sold at a lower price together than separately and sells them at a higher price.
“The deceptive business practices will not go away, but rather will evolve because the firms want to make sure they remain profitable regardless of pressure from the government,” the Korea Consumer Agency said.
It pointed out that the government’s aforementioned scheme to put senior officials in charge of overseeing prices was implemented under the 2008-13 Lee Myung-bak administration but failed to tame inflation in the end.