Shrinkflation is the process of reducing the size or quantity of a product while maintaining its original price. This tactic allows companies to manage rising production costs without overtly increasing prices, which could deter price-sensitive customers. For instance, a bag of chips that once contained 200 grams might now hold only 180 grams, yet the price tag remains unchanged. The packaging often remains the same size, giving the illusion that the product quantity hasn't changed.
While shrinkflation helps companies maintain their profit margins, it comes at a significant cost to consumers. The reduction in product size means that shoppers are effectively paying more per unit of measure, whether it’s per gram, ounce, or liter. This hidden price increase can be particularly insidious because it's less noticeable than a straightforward price hike.
For example, if a household buys a product every week, a 10% reduction in size could mean they need to purchase it more frequently, leading to higher overall spending over time. This incremental increase can add up, stretching household budgets thinner and contributing to the financial strain many families already face.
The price adjustments associated with shrinkflation often exceed the rate of inflation, exacerbating the economic burden on consumers. Inflation measures the rate at which the general level of prices for goods and services rises, eroding purchasing power. However, when products shrink but prices stay the same, the effective price per unit of those products increases at a rate higher than inflation. This discrepancy means that even as wages struggle to keep pace with inflation, the real cost of living climbs even more steeply due to shrinkflation.
One of the most troubling aspects of shrinkflation is its deceptive nature. Consumers may not immediately notice that a product has shrunk, especially if the packaging and branding remain consistent. This lack of transparency undermines trust between consumers and manufacturers, leading to frustration and a sense of being duped.
Moreover, companies often market these downsized products with the same vigor as before, highlighting other minor improvements or features to divert attention from the reduced quantity. For instance, they might advertise "new and improved" formulas or packaging, distracting from the fact that there's less product inside.
Several well-known brands and products have been reported to practice shrinkflation, often to the dismay of loyal consumers. Here are a few notable examples, along with the average price changes in the EU over the past 15 years, the corresponding average EU inflation rates, and the changes in raw materials and labor costs:
Toblerone: The iconic Swiss chocolate bar made headlines in 2016 when its manufacturer, Mondelez International, widened the gaps between the distinctive triangular chunks. The result was a reduction in weight from 170 grams to 150 grams. The price rose from €2.50 in 2009 to €3.80 in 2023. During this period, the average inflation rate was approximately 1.8% per year, but the price of Toblerone increased by 52%, far exceeding the cumulative inflation of around 29%. Raw materials cost index increased by 65% and labor cost index by 25%.
Cereal Boxes: Major cereal brands like Kellogg’s and General Mills have reduced the size of their cereal boxes. For instance, a box that used to contain 500 grams might now only contain 450 grams. The average price increased from €3.00 in 2009 to €4.10 in 2023. The average inflation rate was 1.8% per year, while the price of cereal increased by 37%, compared to a cumulative inflation of 29%. Raw materials cost index increased by 65% and labor cost index by 25%.
Coffee: Many coffee brands have downsized their packages from a full pound (16 ounces) to 12 or 14 ounces. The prices increased from €4.00 in 2009 to €5.40 in 2023. With an average inflation rate of 1.8% per year, the cumulative inflation would be around 29%, but the price of coffee increased by 35%. Raw materials cost index increased by 65% and labor cost index by 25%.
Toilet Paper: Some toilet paper brands have reduced the number of sheets per roll or made the sheets narrower. The prices increased from €5.00 in 2009 to €6.40 in 2023. With the average inflation rate at 1.8% per year, the cumulative inflation would be around 29%, while the price of toilet paper increased by 28%, which is roughly in line with inflation. Raw materials cost index increased by 65% and labor cost index by 25%.
Chips and Snacks: Bags of snacks like Lay’s chips have seen reductions in weight while maintaining the same price. A bag that once held 200 grams might now hold only 180 grams. Prices have increased from €1.50 in 2009 to €2.50 in 2023. The average inflation rate was 1.8% per year, but the price of chips increased by 67%, significantly higher than the cumulative inflation of 29%. Raw materials cost index increased by 65% and labor cost index by 25%.
Soft Drinks: Some soda companies have reduced the volume of their bottles from 2 liters to 1.75 liters. Prices have risen from €1.00 in 2009 to €2.00 in 2023. The average inflation rate was 1.8% per year, while the price of soda increased by 100%, far exceeding the cumulative inflation of 29%. Raw materials cost index increased by 65% and labor cost index by 25%.
Ice Cream: Popular ice cream brands like Breyers have decreased the size of their containers from 64 ounces to 48 ounces. Prices have increased from €3.50 in 2009 to €4.80 in 2023. With the average inflation rate at 1.8% per year, the cumulative inflation would be around 29%, but the price of ice cream increased by 37%. Raw materials cost index increased by 65% and labor cost index by 25%.
The following chart illustrates the changes in average product prices, EU inflation rate, raw materials cost index, and labor cost index over the past 15 years:
Awareness is the first step in combating the effects of shrinkflation. By paying close attention to product sizes and unit prices, consumers can make more informed purchasing decisions. Tools such as unit price comparisons on store shelves or using mobile apps designed to track price changes can help shoppers identify and avoid shrinkflated products.
Additionally, consumer advocacy groups play a crucial role in holding companies accountable for their pricing practices. By bringing attention to shrinkflation and pushing for greater transparency in product labeling, these organizations help protect consumers from deceptive practices.
Shrinkflation represents a hidden challenge in today’s economic landscape, subtly eroding the purchasing power of consumers while allowing companies to maintain profit margins. As product sizes decrease and prices rise faster than inflation, shoppers are left paying more for less, often without realizing it. Greater awareness and transparency are essential in helping consumers navigate this tricky terrain and make informed choices that protect their financial well-being.