The latest side-effect of Brexit: Shrinkflation

LONDON 'Britain is suffering from a surprising side-effect of Brexit: our food is getting smaller.Since the collapse in the value of the pound after last June's vote to leave the EU, food products have gotten smaller.The latest brands to succumb are Doritos, Peperami, and Coco Pops, as highlighted by the Guardian and the Grocer this week. The weight of a Dorito packet is shrinking by 10%, for example.Hula Hoops, Maltesers, and Toblerone have all similarly been downsized, in a trend dubbed "shrinkflation."It's called shrinkflation because, while the product itself is shrunk, in most cases the price isn't. The price is, in effect, inflated because you're paying the same amount for less.Why is this happening'Few foods are made completely in one country. Somewhere along the line ingredients must be imported or the finished product is exported. This leaves producers vulnerable to foreign exchange fluctuations.When the pound fell to multiyear lows against the euro and dollarafter last year's the Brexit vote, many food producers suddenly found themselves with higher costs. Reluctant to shrink profit margins, they searched for solutions.Consumer goods giant Unilever found itself in a very public spat with Tesco over the price of Marmite last year. Unilever wanted Tesco to raise its prices to account for the slump in the pound and protect its profit margin. Tesco didn't want to put off customers with rising prices. In the end, Unilever backeddown.Perhaps with the Unilever spat in mind, many large food producers appear to prefer the shrinkflationroute to deal with the currency fall out.Selling less of something for the same price is a convenient way for retailers to deal with the change in exchange rates without raising prices. Higher prices are more noticeablethan shrinking packages, so run a great risk of making customers angry.Of course, the companies don't say this. Explaining Coco Pops downsizing from 800 grams to 720 grams, Kellogg's told the Guardian: "We recently reduced sugar in Coco Pops Original by 14%, which has reduced the weight of some packs. By removing some of the sugar in the recipe and changing the coating, each Coco Pop weighs less than the previous recipe."Shrinkflation is here.Join the conversation about this storyNOW WATCH: Robert Shiller on what a rate hike will do to asset prices and who Trump shouldn't put in charge of the fed
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