Finance:Shrinkflation

Short description: Reduction of quantity/quality of a good without corresponding price reduction

Toblerone chocolate bar, 2006

2016 Toblerone bar from the United Kingdom with larger gaps between peaks, using 10% less chocolate

In economics, shrinkflation, also known as the grocery shrink ray, deflation, or package downsizing, is the process of items shrinking in size or quantity, or even sometimes reformulating or reducing quality, while their prices remain the same. The word is a portmanteau of the words shrink and inflation. First usage of the term "shrinkflation" with its current meaning has been attributed to the economist Pippa Malmgren, though the same term had been used earlier by historian Brian Domitrovic to refer to an economy shrinking while also suffering high inflation.

Without explicitly using the term Shrinkflation, macroeconomist Vivek Moorthy much earlier documented and analysed the shrinkage effect of inflation, explaining it by Arthur Okun’s "invisible handshake" approach. Prices are …… based on notions of trust and fairness. it is considered acceptable for firms to respond to cost increases, but not to demand increases. Firms selling a branded product will make deliberate efforts to continue selling at the same price thereby retaining loyal customers. Hence, to cope with inflation, fast moving consumer goods firms would often resort to shrinking the product size to avoid raising prices.

Shrinkflation allows companies to increase their operating margin and profitability by reducing costs whilst maintaining sales volume, and is often used as an alternative to raising prices in line with inflation. Consumer protection groups are critical of the practice.

Economic definition

A parallel to shrinkflation is currency debasement. This graph shows decline in coin silver content over the history of the Roman Empire.

Shrinkflation is a rise in the general price level of goods per unit of weight or volume, brought about by a reduction in the weight or size of the item sold. The price for one piece of the packaged product remains the same. This sometimes does not affect inflation measures such as the consumer price index or Retail Price Index, i.e. it might not increase in the cost of a basket of retail goods and services, but many indicators of price levels and thus inflation are linked to units of volume or weight of products, so that shrinkflation also affects the statistically represented inflation figures.

Consumer impact

Consumer advocates are critical of shrinkflation because it has the effect of reducing product value by "stealth". The reduction in pack size is sufficiently small as not to be immediately obvious to regular consumers. An unchanged price means that consumers are not alerted to the higher unit price. The practice adversely affects consumers' ability to make informed buying choices. Consumers have been found to be deterred more by rises in prices than by reductions in pack sizes. Suppliers and retailers have been called upon to be upfront with customers. According to Ratula Chakraborty, a professor of business management, they should be legally obliged to notify shoppers when pack sizes have been reduced. Corporate bodies deflect attention from product shrinkage with "less is more" messaging, for example by claiming health benefits of smaller portions or environmental benefits of less packaging.

However, in 2023 the French grocery chain Carrefour has started to warn their customers about these practises.

Detailed evidence for shrinkflation

The UK Office for National Statistics wrote in 2019, "We identified 206 products that shrank in size and 79 that increased in size between September 2015 and June 2017. There was no trend in the frequency of size changes over this period, which included the EU referendum. The majority of products experiencing size changes were food products and in 2016, we estimated that between 1% and 2.1% of food products in our sample shrank in size, while between 0.3% and 0.7% got bigger. We also observed that prices tended not to change when products changed size, consistent with the idea that some products are undergoing 'shrinkflation'."

Impact of Shrinkflation on CPIH in the UK, with the number of food price quotes that saw a change in package size per month

Instances of shrinkflation

An example of Shrinkflation: Dove soap bars were made 10% smaller in 2022

• In 2010, Kraft reduced its 200 g Toblerone bar to 170 g.
• Coffee sold in 1 lb (453.6 g) bags shrank to 400 g or smaller in the 1980s
• Tetley tea bags were sold in boxes of 88 instead of 100.
• Nestlé reduced its After Eight Mint Chocolate Thins box from 200 g to 170 g.
• Cadbury's Crunchie were sold in packs of three instead of four.
• In 2003, Dannon shrunk its yogurt containers from 8 ounces to 6 ounces.
• In January 2009, Häagen-Dazs announced that it would be reducing the size of their ice cream cartons in the US from 16 US fl oz (470 ml) to 14 US fl oz (410 ml).
• Birds Eye potato waffles were reduced from a 12 pack to a 10 pack
• In 2015, Cadbury Fingers removed two fingers from each pack, reducing the weight of a pack from 125 grams to 111 grams.
• In July 2015, a tub of Cadbury Roses which weighed 975 g in 2011, was reduced to under 730 g, while a tub of Cadbury Heroes was reduced to 695 g. However the price remained the same at around £9.
• In 2016, Terry's Chocolate Orange was reduced from 175 g to 157 g by changing the moulded shape of each segment to leave an air gap between each piece.
• In 2016, Mondelez International again reduced the size of the UK 170 g Toblerone bar to 150 g, while the 400 g bar was reduced to 360 g. This was done by enlarging the gap between the chocolate triangles.
• In 2017, Milka Alpine Milk and Milka Nuts & Raisins got reduced from 300 g to 270 g while Triolade got reduced from 300 g to 280 g, all without changing the bag size.
• In 2017, McVities reduced the number of Jaffa Cakes in every standard packet from 12 to 10, raising the cost per cake from 9.58 p to 9.9 p
• In 2018, Koopmans reduced the weight of their buckwheat flour packages by 20% from 500 g to 400 g - claiming 'renewed' on the package, without specifying that 'renewed' only meant that less product was provided. It is unknown whether wholesale prices were affected, while it is certain that retail pricing remained exactly the same.
• In 2020, Unilever reduced the size of Ben & Jerry's ice-cream tubs in Europe, going from 500 ml to 465 ml, whilst still retaining the RRP of around 5 euros. Despite this, Unilever has publicly criticized rival ice-cream brands for shrinkflation in the United States, where Ben & Jerry's ice-cream is still sold in pint-sized (473 ml) tubs.
• In 2021, Sainsbury's replaced their 80 g Spicy Thai Crackers with a 40 g packet, but the price was less than halved resulting in a by-weight price increase of over 15%.
• In 2021, General Mills shrunk their family-sized boxes of cereal down from 19.3 ounces to 18.1 ounces. That means the unit cost per ounce of the product has increased, but for the consumer, the average price in the United States remained $2.99.
• In 2022, Procter & Gamble reduced the number of double-ply sheets per roll of toilet paper from 264 to 244 sheets in the 18-count mega package. This amounts to approximately a roll and a half in the 18-count package.
• In 2022, Unilever reduced the size of Dove soap bars from 100 g to 90 g, with most retailers either maintaining the same price or increasing prices.
• Fish fingers were typically sold in packages of 450 g. In recent years several manufacturers switched to offer them in packages of 405 g instead.
• CVS Pharmacy reduced the amount of Dextromethorphan and Guaifenesin in their 4 oz Tussin DM cough formulation by half, and then doubled the recommended amount per dosage from 10 ml to 20 ml. The 8 oz bottle remains at previous concentration. The 4 oz bottle is now therapeutically equivalent to one-fourth of the usual 8 oz bottle. The 4oz bottle retails at $1.70/oz and the 8 oz bottle retails at $1.16/oz.
• In 2023, researchers conducted a study on products known to have shrunk in size but not in price. They found that the average reduction percentage of the product sizes was 11.84%, which the researchers then applied to various other products to demonstrate the absurd effect of shrinking product sizes.
• In 2023, Mars, Incorporated reduced the weight of their Whiskas cat food by 15%, reducing the weight of each pouch from 100 g to 85 g. The price of the packs did not change. This was applicable to their 12×100 g, 40×100 g, 80×100 g, and individual products for both the "in jelly" and "in gravy" products.
• In India in 2008, Procter and Gamble reduced the pack size of its detergent Tide from 1K to 850 gms while maintaining the same price. Similarly around 2012, Orbit reduced the chewing gum pack size from 6 to 5 units, keeping the price at Rs. 5…In 2013 the staple breakfast item idli was shrunk from 100 gms to 75 gms, as reported in the Bangalore Mirror.

Skimpflation

In October 2021, NPR's Greg Rosalsky from Planet Money proposed the term skimpflation to refer to a degradation in the quality of services while keeping the price constant, such as a hotel offering a more meager breakfast or reducing the frequency of housekeeping. In 2023, Guardian Money described a number of ingredient changes in British supermarket foods - such as a brand of mayonnaise changing from 9% egg yolk to 6% egg and 1.5% egg yolk - as an example of skimpflation.

See also

• Purchasing power
• Real versus nominal value (economics)
• Deflation
• "The Grocery Shrink Ray"
• Size–weight illusion
• Deceptive packaging
• Consumer protection
• Grundpreisverordnung (de) - German law to specify prices per 1 kilogramm, 1 litre, 1 cubic metre, 1 metre or 1 square metre for easier comparison - part of PAngV

External links

• shrinkflation.info A website in Japanese explaining how hundreds of well-known products have been reduced in size, how much have been reduced and when they were reduced.
• The impact of Shrinkflation on the CPIH: January 2012 to June 2017
• Shrinkflation – the economics of stealing from customers