The Phenomenon of Shrinkflation

The phenomenon of 'shrinkflation': so significant in the world currently that even a subreddit exists under its name - r/shrinkflation - with 128,000 members. As of writing this article, the most recent post, from 11 hours ago, lamenting a decrease in the number of crisps in a Pringles can, begins with the line 'pretty peeved off'. This sentiment seems to be echoed by the general population, with news articles headlined 'Honey, they shrunk the groceries!' and ''Shrinkflation' isn't a trend - it's a permanent hit to your wallet'. But is this notable phenomenon rooted in actual, tangible reductions in product size? And if so, what are the reasons behind it and is anything being done about it?

Shrinkflation (or package downsizing), a term coined by British economist Pippa Malmgren, refers to a form of hidden inflation wherein the size of a product is decreased while maintaining its sticker price. In doing so, firms can raise the price per given amount of a product, boosting profit margins or maintaining them when input costs rise. This is most often seen in the food and drink industries. Since, psychologically, consumers are more likely to notice price increases in products, firms choose to reduce sizes instead, hoping that minimal shrinkage will go unnoticed. However, disadvantages of this tactic include potential negative consumer brand perceptions and a decrease in intentions to repurchase the product, leading to sales coming to a standstill or declining. The Office for National Statistics identified 206 products that shrank in size between September 2015 and June 2017, with the majority of products with size reductions being bread and cereals.

Companies tend to use the tactic of shrinkflation for one of two reasons, generally. Primarily, higher production costs (for example, due to an increase in costs of labour or raw materials) may push firms to engage in shrinkflation. In particular, for products which are more price elastic in demand, reducing the weight, volume, or quantity of products allows companies to maintain sufficient profit levels without losing volume of sales. In 2023, Mars Inc decided to decrease Galaxy chocolate bars from 110g to 100g (despite the retail price increasing from £1.39 to £1.50 in 2022). This is just one example of brands engaging in shrinkflation in order to respond to increases in costs of raw materials; cocoa prices have risen by 207% over the last year.

The other reason is due to market competition. To maintain market share (the percentage of total sales in an industry made by a particular company), some companies may resort to shrinkflation: in a competitive industry, increasing prices could result in customers shifting to a different brand.

Despite the fact that the US Bureau of Labor Statistics shows that shrinkflation has little effect on overall inflation rates, political leaders are seeking to tackle the issue. Recently, governments have been considering taking action against shrinkflation. In the USA, Senator Bob Casey introduced a bill - the Shrinkflation Prevention Act of 2024. If passed as law, the Shrinkflation Prevention Act would 'prohibit shrinkflation by giving the Federal Trade Commission (FTC) and state attorneys general authority to crack down on corporations deceiving consumers', establishing shrinkflation as an 'unfair or deceptive act or practice'. Similarly, in April, the finance ministry in France announced that French retailers would have to notify shoppers when products have been decreased in size without a corresponding price cut, so as to tackle shrinkflation. From July 2024, French retailers of common consumer goods will have to display the fact that products have been downsized such that the unit price increases.

Similar to shrinkflation, the term 'skimpflation' was proposed by Greg Rosalsky in 2021, and refers to a degradation in the quality of a product or service while the price remains the same. In 2023, Guardian Money detailed various ingredient changes in British supermarket foods - for example, a mayonnaise brand switching from 9% egg yolk to 6% egg and 1.5% egg yolk, or replacing oil content in margarine with water. In an article for The Blind Spot, Dario Garcia Giner suggested that shrinkflation and skimpflation were examples of the Grossman-Stiglitz paradox, which states that perfectly informationally efficient markets are impossible.

In the future, it will be interesting to see whether shrinkflation continues, and at what levels. In particular, with countries such as France implementing measures to prevent shrinkflation, it will be fascinating to observe whether these measures will be effective. For now, however, companies continue to stealthily decrease product sizes, and it is primarily up to consumers to ascertain whether shrinkflation has occurred.

Ritisha Baidyaray