What is it?
Inflation is the rise in prices of goods and services over time, reducing consumers’ purchasing power. In the CPG world, most categories’ decomposition trees increase in Average Retail Price (ARP) are between 2% to 4%. ARP is not a direct measurement of inflation, though – pricing for a category can increase due to other factors, such as premiumization, a lack of promotion compared to last year, and consumer shift toward larger sizes or multipacks instead of single servings.
Why is it important?
In CPG, inflation often shows up as higher shelf prices, smaller package sizes (“shrinkflation”), or both, and it can be tracked in syndicated data through Average Retail Price (ARP) trends.
What are some examples?
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Eggs spiked in price during 2022 due to supply issues, pushing shoppers toward substitutes.
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Snack brands introduced “shrinkflation,” keeping price points the same but reducing pack size.