Written by Nitya Wanchoo
It’s agreed that one of the worst feelings in the world is realizing that your favorite bag of chips has more air than it does chips. This is one sneaky way that brands cut costs without customers realizing. The reduction of the quantity of a good and price stays the same is an effective inflation strategy known as shrinkflation. “Raising the price per given amount is a strategy employed by companies, mainly in the food and beverage industries, to stealthily boost profit margins. Changes are minimal and limited to a small range of products, yet are still enough to make accurate measures of inflation more difficult to gauge.” (Liberto, 2023)
Shrinkflation is used mostly for goods sold in standardized sizes like groceries and household goods so that consumers don’t notice and businesses make more money. In fact AARP estimates that some of the most necessary products undergo the most shrinkflation like “toilet paper, cereal, yogurt, laundry detergent, and shampoo and conditioner.” (Fuscaldo, 2022) Shrinkflation can take place in a variety of ways be it through reduced size, quantity, or change of formula.
The practice is more common than one might expect, and it actually goes back centuries. Consider a loaf of bread in feudal Europe. When grain was scarce, bakers had one of two choices: “they could either raise prices or sell smaller loaves. They chose the latter.” (Plocek, 2022) This makes sense because this way, the same consumer base is maintained. Bakers that chose to raise prices were deemed unethical and even ran the risk of being run out of town. Essentially, when people saw prices being raised for a good without an increase in quality, they felt cheated.
Shrinkflation is considered a common producer of inflation but that’s actually a misconception. Rather, it is a consequence of inflation in the economy. Britannica summarizes the difference between the two perfectly: “Price inflation is an increase in the price of a good or service for the same quantity. With shrinkflation, instead of a rise in the numerator (price), it’s a decrease in the denominator (quantity). Either way, the cost to you as a consumer is higher than it was.” (Ashburn, 2024) So, shrinkflation is an attempt for companies to mitigate rising variable costs when producing a good.
But, shrinkflation can be better introduced and integrated so that customers don’t react negatively when they find out. Companies that are transparent about size adjustments can retain some business by providing an explanation and staying honest. Other brands attempt to justify the price hike by incorporating messaging that convinces consumers of improved quality. Lastly, businesses can avoid people noticing shrinkflation altogether by releasing new product lines with varying quantities so that consumers can choose based on their budget and needs.
On the business front, handling shrinkflation requires thoughtful communication and brand management. Companies that are transparent about price adjustments or product size changes can help mitigate negative fallout. Some may include messaging that emphasizes improved quality or eco-friendliness due to more efficient packaging. Others may introduce new product lines with different sizes or quantities as options to allow consumers to choose based on their budget and needs.
Shrinkflation is an enormous issue today. People, from President Biden to Cardi B and even Cookie Monster, have been noticing cookies and ice creams, among other products, getting smaller. In an online X (formerly Twitter) thread, Cookie Monster posted “Me hate shrinkflation!” and the White House promptly replied “C is for consumers getting ripped off.” (Selyukh, 2024) The posts resonated strongly with Americans, and got over 5 million views, 5,000 reposts, and 30,000 likes combined.
Thankfully, Senator Warren (Democratic, Massachusetts) and Senator Casey (Democratic, Pennsylvania) have something in the works. They’ve introduced the Shrinkflation Prevention Act as of February 28, 2024 to combat “greedflation” (shrinkflation). What it would essentially do is “Give the Federal Trade Commission and state attorneys general the authority to punish companies engaging in shrinkflation.” (Pisani, 2024) Ideally, the very threat of punishment would keep some companies from shrinkflating products. Moreover, this act would authorize state attorneys general to bring civil actions against corporations engaging in shrinkflation. (Casey, 2024)
Even though shrinkflation often goes unnoticed, it greatly impacts consumer behavior. If customers find out their favorite brands have been shrinking product size, it’s enough to push loyal customers away. Shrinkflation can easily break the trust or ruin the relationship between a brand and consistent users of the goods that the brand produces. For instance, many Oreo lovers stopped purchasing Oreos consistently when they noticed the changed ratio of cookie to cream. Another way shrinkflation affects consumer behavior is by altering buying habits. According to Super Market News, “33% buy in bulk rather than an individual item” (Riley, 2022) This is because brands don’t usually downsize all their products simultaneously.
In the meanwhile, Forbes provides a few suggestions as to how consumers can navigate shrinkflation on their own. As mentioned before, the first is buying in bulk. They give an example: “A 9.25-ounce package being shrunk down to 8.75 ounces while keeping the price of $3.05 the same. The downsizing means the price per ounce increases to 35 cents. The same brand offers a 14-ounce package for $4.31, and leaves the size and price unchanged. The large variation only costs 30 cents per ounce.” (Smith, 2022) Another way customers can avoid shrinkflation is by buying whole foods instead of pre-packaged products which are typically less
susceptible to shrinkflation. Also, Edgar Dworsky, founder and editor of Consumer World recommends that people complain to companies. If this doesn’t elicit a change, it may at least lead to a few consolation coupons. (Konish, 2022) A last strategy is to switch to alternatives, if name brand products turn to shrinkflation, then consumers should turn to competing or generic store brand products, which are less susceptible to shrinkflation.
Shrinkflation is here to stay as a nuanced strategy, but with the passage of the newly introduced act, it’ll hopefully be lessened soon. With appropriate scrutiny, the market can potentially strike a balance where companies can flourish without cheating consumers. It’s important now more than ever with a quickly changing economic landscape for customers to have fair access to products. Until then, customers can take it upon themselves to stay aware of product quantity and prices so that they can continue to make informed purchases.
References
Ashburn, D. (2024, March 15). Shrinkflation: Inflation hiding in plain sight. Encyclopædia Britannica. https://www.britannica.com/money/what-is-shrinkflation
Casey, B. (2024, February 26). Shrinkflation Prevention Act of 2024. Fighting for Pennsylvania Families. https://www.casey.senate.gov/download/shrinkflation-prevention-act-one-pager
Fuscaldo, D. (2022, December 9). 7 products hit worst by shrinkflation. AARP. https://www.aarp.org/money/budgeting-saving/info-2022/products-impacted-by-shrinkflation.html
Konish, L. (2022, September 1). 64% of consumers are worried about ‘shrinkflation.’ What it is and how to watch for it while shopping. CNBC. https://www.cnbc.com/2022/08/29/64percent-of-consumers-worry-about-shrinkflation-heres-what-to-watch-for.html
Liberto, D. (2023, November 16). Shrinkflation: What it is, reasons for it, how to spot it. Investopedia. https://www.investopedia.com/terms/s/shrinkflation.asp
Pisani, J. (2024, March 5). Yes, even Cookie Monster is upset about ‘shrinkflation.’ The Wall Street Journal. https://www.wsj.com/economy/cookie-monster-shrinkflation-economy-white-house-biden-8d681811
Plocek, K. (2022, August 26). “Shrinkflation” is as old as the hills. Slate Magazine. https://slate.com/news-and-politics/2022/08/what-is-shrinkflation-a-history.html
Riley, C. R. (2022, August 30). ‘Shrinkflation’: How it’s affecting shopper buying habits. Supermarket News. https://www.supermarketnews.com/issues-trends/shrinkflation-how-its-affecting-shopper-buying-habits
Selyukh, A. (2024, March 8). The state of “shrinkflation”: Why Biden called out skimpy bags of potato chips. NPR. https://www.npr.org/2024/03/08/1236921674/biden-state-of-the-union-shrinkflation-prices
Smith, K. A. (2022, April 26). Smaller sizes, same price: How shrinkflation affects consumers. Forbes. https://www.forbes.com/advisor/personal-finance/what-is-shrinkflation