Inflation is on the rise. Consumers are feeling the pressure of price increases on everything from food and gas to furniture and automobiles. Newly published data shows the U.S. consumer price index (CPI) has risen 7.5% in the past 12 months, and this is having a real impact on the average pocketbook. But, did you know it’s also having a measurable impact on store shelves as well? And, no, I’m not talking about stock-outs.

Faced with rising costs and margin pressures, CPG manufacturers and retailers have been forced to increase prices. This trend began around July 2021, and we’re already seeing shopping behaviors change. A recent survey showed 49% of consumers plan to switch to lower-priced brands due to inflation concerns. With prices expected to rise throughout 2022 and shoppers more price-conscience than they were before the pandemic, this switch to lower priced brands and private label will likely continue. CPG manufacturers and national brands are responding by reducing package sizes to hide price increases from the average consumer.

It’s a practice known as “shrinkflation” — where items remain the same price while the package size gets smaller. Some changes are so small they don’t affect packaging, aside from updating the printed quantity or weight. For example, Frito-Lay’s reducing regular bags of Dorito’s from 9.75 oz to 9.25 oz probably was indistinguishable to the average consumer. But when Tillamook ice cream was one of the last brands to downsize to a 48 oz container (down from 56 oz), the change was obvious. The price stayed the same, but now consumers are paying 15% more per ounce.

Shrinking containers are just about everywhere, from the number of trash bags per pack and paper towels per roll to the ounces per box of cereal, cookies, candy or pet food. It turns out that while people tend to remember prices, they don’t really pay attention to sizes. It’s not uncommon for these reductions to represent up to a 30% price increase. But with ingredients, manufacturing, freight and labor costs rising, most manufacturers have little choice. Clorox plans on raising prices on 85% of products by June 2022, with additional price changes possible depending on how inflation impacts the rest of the year. Consumer price sensitivity is expected to increase this year, so it makes sense for suppliers to reduce sizes to keep the per-package prices stable. Some retailers such as dollar stores are pushing CPG companies to maintain specific price points despite rising costs, and the only way to do this is with smaller packages.

These changes not only impact consumer prices, but they also have a direct impact on merchandising plans for CPG suppliers and retailers alike. Less ice cream per package means smaller packages and smaller packages mean existing space plans and planograms won’t work anymore. All the ice cream sections need a reset to better optimize store space based on the new product dimensions. With the size of packaged goods shrinking throughout the entire store, resetting shelves can be a nearly insurmountable task without the right technology.

That’s where Blue Yonder’s smarter category management capabilities can provide significant benefits. We provide a centralized solution to holistically maintain, analyze, and update product attributes, assortment plans, floorplans, and space plans across all stores. As soon as a product dimension changes, you can instantly update hundreds of thousands of planograms and floorplans and accurately deliver them to the stores. This saves hours and hours of manual work and ensures plans accurately reflect available space. With the increased speed and volume of planogram updates, you can more efficiently tailor local assortments for more satisfied customers and maximized sales. And with our cloud approach to innovation, you’ll gain greater scalability and security with a lower total cost of ownership.

Because the process is streamlined, it’s easy to update and distribute new planograms instantly and as often as necessary. For CPG manufacturers that design planograms for their products, advanced category management capabilities provide an opportunity to collaborate and deliver value for their retail partners. Supplier category captains and advisors can provide retailers with space optimization recommendations and updated space plans to make it easier for the retailers to stock the newly repackaged items. This increased efficiency allows for both suppliers and retailers to improve speed to shelf and continuing to adapt to meet the needs of consumers. With Blue Yonder, you can automate your planogram generation to meet consumer demand fast and improve your product and performance. Our AI-powered demand forecasting helps synchronize operations across the supply chain for optimal performance. So, when demand forecasts indicate an uptick in private label sales, plans can be further updated to increase facings of the products to meet increased demand. The solution’s store-specific micro-merchandising capabilities helps you efficiently execute category plans that optimize the position, performance and layout of product categories at scale. No matter how often demands shift or packages change, Blue Yonder helps you easily manage these changes to keep store performance up. Visit our website to learn more about our category management and space planning capabilities.