Shrinkflation – A hedge against Inflation?
You may have noticed recently that you’re going through a roll of paper towels at a faster clip or that there seem to be fewer tortilla chips in the bag. This isn’t your imagination! The concept is known as downsizing or shrinkflation. Shrinkflation is basically downsizing.
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 or increase. 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.
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. Shrinkflation runs the risk of turning customers away from a product or brand if they notice they are getting less for the same price.
Shrinkflation is basically a form of hidden inflation. Companies are aware that customers will spot product price increases and opt to reduce the size of them instead, understanding that minimal shrinkage will probably go unnoticed. More money is squeezed out not by lifting prices but by charging the same amount for a package containing a little bit less.
Some examples of Shrinkflation:
- In 2010, 200g Toblerone bar to 170g.
- Coffee sold in 1 lb (453.6g) bags shrank to 400g or smaller in the 1980s
- Tetley tea bags were sold in boxes of 88 instead of 100.
- 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).
- 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 9.58p to 9.9p[
- In 2023, Mars, Incorporated reduced the weight of their Whiskas cat food by 15%, reducing the weight of each pouch from 100g to 85g. The price of the packs did not change. This was applicable to their 12x100g, 40x100g, 80x100g, and individual products for both the “in jelly” and “in gravy” products.