It is not a well-known term in the field of economics, and yet it is, now more than ever, the order of the day. Reduction is the result of the union of two words: reduction and inflation. And it consists of increasing prices by reducing the amount of product for sale and not necessarily the amount marked on the product.
I will give a fairly simplified example. The commercial reality and cost scandals are much more complex, but the idea is the same.
Let's imagine a food product that is marketed at 1.00 euro in a package, which houses 130 grams of said product. Let's also assume that the variable cost is 50 cents. Suddenly, the manufacturer's costs rise by 30%. That is, 15 cents.
So that your unit margin is not affected, the manufacturer has two possible options: inflation or reduction.
In the case of inflation, the operation is quite simple. Increase the price from 1.00 euros to 1.15 euros. 15%. Nothing more and nothing less. It is what we are all experiencing, and with much higher increases. Let us note that its total margin is still 50 cents (the manufacturer has only passed on the increase in costs, and thanks to this, the same is obtained as before with each unit). Let's see that the percentage margin is 0.50 euros over 1.15 euros (it has dropped from 50% to 43%). You get the same in money, but less in percentage.
There is the second possibility: reduflation. It consists of removing grams, but keeping the price. If the content is reduced to 100 grams and it continues to cost one euro, and the brand is able to hide it with the face of the container, thanks to a good industrial designer, and the consumer does not notice, they will be taking home 30 grams less paying the same amount. If 130 grams cost 65 cents after the increase, 100 grams cost 50 cents. Since the price is one euro, the margin is still 50% and the unit margin is 50 cents. Exactly the same as at the beginning! It seems magic, right?
And now the big question, is this deceiving the consumer? Well no. I'll say it bluntly. I think that it is the best favor that a manufacturer can do to the citizen. Reduce the doses so that the money reaches you. No cheating or cardboard. Costs have gone up, prices too, wages are going to, and companies need to keep their unit margins to absorb them. They only have the option of delivering less product.
The positive consequence is that we will eat a little less and the scale will appreciate it.
