Shrinkflation

Last updated

Pascal binczak.jpg
Toblerone chocolate bar, 2006
Toblerone 3362.jpg
2016 Toblerone bar from the United Kingdom with larger gaps between peaks, using 10% less chocolate [1]

In economics, shrinkflation, also known as package downsizing or weight-out, [2] is the process of items shrinking in size or quantity while the prices remain the same. [3] [4] [5] The word is a portmanteau of the words shrink and inflation. Skimpflation involves a reformulation or other reduction in quality. [6]

Contents

Shrinkflation allows manufacturers and retailers 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. [7] 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. Fineness of early Roman Imperial silver coins.png
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.[ citation needed ] 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,[ citation needed ] 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.

The first use 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. [8]

Causes

Barak Orbach, an academic economist, argues that competition typically drives shrinkflation: "When supply shocks or other factors inflate production costs, businesses must pass on cost increases to maintain profitability. However, in competitive markets, direct price increases are risky. Under such conditions, businesses often choose to raise prices indirectly through downsizing." [9]

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. [10]

Consumer impact

Many grocery stores provide unit price information for all products. In this Norwegian grocery store, the price for a bottle of ketchup is displayed in terms of the price paid per package (64.90 kr) as well as the paid paid per kilogram (111.90 kr). This allows customers to see how much they will pay and to quickly compare products that have different sizes of packages. SPAR varehandel hyller (Supermarket GROCERY store aisle shelves) Heinz ketchup NORWAY 2023-08-31 (cropped).jpg
Many grocery stores provide unit price information for all products. In this Norwegian grocery store, the price for a bottle of ketchup is displayed in terms of the price paid per package (64.90 kr) as well as the paid paid per kilogram (111.90 kr). This allows customers to see how much they will pay and to quickly compare products that have different sizes of packages.

Consumer advocates are critical of shrinkflation because it has the effect of reducing product value by "stealth". [11] The reduction in pack size is sufficiently small as not to be immediately obvious to regular consumers. [12] An unchanged price means that most consumers will not immediately notice the higher unit price, which 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, and some customers would rather have a smaller package at the old price than the old package size at a higher price. [6]

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. [13] In 2023 the French grocery chain Carrefour has started to warn their customers about these practises. [14] [15]

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. [7]

Shrinkflation is not the only cause of reduced package sizes. In some cases, such as junk food, some customers do prefer smaller package sizes. [6]

In other cases, the change is part of a trend to adjust package sizes. In 2003, Dannon shrunk its yogurt containers from 8 ounces to 6 ounces, because consumers thought their larger product was too expensive overall; many, though not all, of the grocery stores selling it maintained the old price for the smaller product. [2] Most yogurt manufacturers followed suit, resulting in smaller packages. [6] [2]

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'." [16]

Impact of Shrinkflation on CPIH (UK) 2012 - 2017.png
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 Shrinkflation in Dove soaps 100g 2022 and 90g 2023.jpg
An example of shrinkflation: Dove soap bars were made 10% smaller in 2022

Skimpflation or Shitflation

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. [35] 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. [36]

Unlike changes to the size and weight of a product, skimpflation is more difficult to measure in a standardized way, and consequently goes unrecorded in measurements of inflation. [6]

Conversely, in September 2022, Izabella Kaminska's The Blind Spot published an article that proposed the term shitflation in reference to maintaining a product's price while decreasing quality. This term had already been used in online communities such as Reddit or Twitter since 2020. The article's author, Dario Garcia Giner, proposed that shrinkflation and shitflation spoke to the Grossman-Stiglitz paradox, and argued they were akin to "Trojan horses buried in the heart of mainstream finance — just waiting to tear down the system by discombobulating relative values in the big-data spreadsheets that central bankers and financiers depend on to manage economic allocation."

The term has been used by President Joe Biden in 2023 and 2024, blaming companies for deploying this tactic to increase their profits. [37] Biden's claim has been criticized, with some conservatives arguing that "he is the cause". [38]

See also

Related Research Articles

<span class="mw-page-title-main">Mars bar</span> Chocolate bar produced by Mars Inc.

Mars, commonly known as Mars bar, is the name of two varieties of chocolate bar produced by Mars, Incorporated. It was first manufactured in 1932 in Slough, England by Forrest Mars, Sr. The bar consists of caramel and nougat coated with milk chocolate.

<span class="mw-page-title-main">Drink can</span> Container specifically made for liquid such as beverages and usually made of aluminum

A drink can is a metal container designed to hold a fixed portion of liquid such as carbonated soft drinks, alcoholic drinks, fruit juices, teas, herbal teas, energy drinks, etc. Drink cans are made of aluminum or tin-plated steel. Worldwide production for all drink cans is approximately 370 billion cans per year.

<span class="mw-page-title-main">Snickers</span> Brand name chocolate bar

Snickers is a brand of chocolate bar consisting of nougat topped with caramel and peanuts, all encased in milk chocolate. The bars are made by the American company Mars Inc. The annual global sales of Snickers is over $380 million, and it is widely considered the bestselling candy bar in the world.

<span class="mw-page-title-main">Steel and tin cans</span> Sealed container for storage of foods

A steel can, tin can, tin, or can is a container made of thin metal, for distribution or storage of goods. Some cans are opened by removing the top panel with a can opener or other tool; others have covers removable by hand without a tool. Cans can store a broad variety of contents: food, beverages, oil, chemicals, etc.

<span class="mw-page-title-main">Tang (drink mix)</span> American drink mix brand

Tang is an American drink mix brand that was formulated by General Foods Corporation food scientist William A. Mitchell and General Foods Corporation chemist William Bruce James in 1957, and first marketed in powdered form in 1959. The Tang brand is currently owned in most countries by Mondelēz International, a North American company spun off from Kraft Foods in 2012. Kraft Heinz owns the Tang brand in North America.

<span class="mw-page-title-main">Galaxy (chocolate bar)</span> Brand of chocolate

Galaxy is a chocolate bar, made and marketed by Mars Inc., and first manufactured in the United Kingdom in the 1960s. Galaxy is sold in the United Kingdom, Ireland, South Africa, the Middle East, Morocco, India, Pakistan, Malta, and is also sold in the United States, Canada, Mexico and various Continental European countries as Dove. In 2014, Galaxy was ranked the second-best-selling chocolate bar in the UK, after Cadbury Dairy Milk.

<span class="mw-page-title-main">Reese's Peanut Butter Cups</span> American candy made by Hersheys

Reese's Peanut Butter Cups are an American candy by the Hershey Company consisting of a peanut butter filling encased in chocolate. They were created on November 15, 1928, by H. B. Reese, a former dairy farmer and shipping foreman for Milton S. Hershey. Reese was let go from his job with Hershey when the Round Barn which he managed was shut down for cost-saving measures. He subsequently decided to start his own candy business. Reese's are a top-selling candy brand worldwide, with more than $2 billion in annual sales.

<span class="mw-page-title-main">History of United States postage rates</span>

The system for mail delivery in the United States has developed with the nation. Rates were based on the distance between sender and receiver in the nation's early years. In the middle of the 19th century, rates stabilized at one price regardless of distance. Rates were relatively unchanged until 1968 when the price was increased every few years by a small amount. Comparing the increases with a price index, the cost of a first-class stamp has been steady. The seal of the Post Office Department showed a man on a running horse, even as railroads and, later, motorized trucks and airplanes moved mail. In 1971, the Post Office became the United States Postal Service, with rates set by the Postal Regulatory Commission, with some oversight by Congress. Air mail became standard in 1975. In the 21st century, prices were segmented to match the sorting machinery used; non-standard letters required slightly higher postage.

<span class="mw-page-title-main">Tropicana Products</span> Orange/fruit juice and soft drink maker

Tropicana Brands is an American fruit-based beverage company. It was founded in 1947 by Anthony T. Rossi in Bradenton, Florida. Between 1998 and 2021 it was a subsidiary of PepsiCo. In August 2021, 61% of Tropicana was sold along with the rest of PepsiCo's juice brand portfolio for $3.3 billion to PAI Partners. PepsiCo retained the remaining 39% of the companies ownership.

<span class="mw-page-title-main">Caramello Koala</span> Chocolate bar

Caramello Koala is a brand of chocolate treat currently manufactured by Cadbury Australia. It consists of a chocolate cartoon koala with a caramel centre.


The spread of metrication around the world in the last two centuries has been met with both support and opposition.

<span class="mw-page-title-main">Metrication in the United Kingdom</span> Adoption of the metric system of measurements in the United Kingdom

Metrication, the process of introducing the metric system of measurement in place of imperial units, has made steady progress in the United Kingdom since the mid-20th century but today remains equivocal and varies by context. Most of government, industry, commerce, and scientific research use the metric system. Imperial units are officially used to specify journey distances, vehicle speeds and the sizes of returnable milk containers, beer and cider glasses, fresh milk is often still sold in multiples of pints, with the metric equivalent also marked, and precious metals are sold by the troy ounce. Metric units must be used when selling other packaged or loose goods, and imperial units can stand alongside the metric units, but it cannot stand out more than the metric units. Imperial units are also often used to describe body measurements and vehicle fuel economy. The national curriculum requires metric units and imperial units that still remain in common usage to be taught in state schools.

<span class="mw-page-title-main">Cup (unit)</span> Cooking measure of volume

The cup is a cooking measure of volume, commonly associated with cooking and serving sizes. In the US, it is traditionally equal to one-half US pint (236.6 ml). Because actual drinking cups may differ greatly from the size of this unit, standard measuring cups may be used, with a metric cup being 250 millilitres.

<span class="mw-page-title-main">Blister pack</span> Type of packaging

A blister pack is any of several types of pre-formed plastic packaging used for small consumer goods, foods, and for pharmaceuticals.

<span class="mw-page-title-main">Cotton duck</span> Plain woven cotton fabric

Cotton duck, also simply duck, sometimes duck cloth or duck canvas, is a heavy, plain woven cotton fabric. Duck canvas is more tightly woven than plain canvas. There is also linen duck, which is less often used.

<span class="mw-page-title-main">Yorkie (chocolate bar)</span> Chocolate bar in the United Kingdom made by Nestlé

Yorkie is a chocolate bar made by Nestlé. It was originally made by York-based company Rowntree's, hence the name.

California Redemption Value (CRV), also known as California Refund Value, is a regulatory fee paid on recyclable beverage containers in the U.S. state of California. The fee was established by the California Beverage Container Recycling and Litter Reduction Act of 1986 and further extended to additional beverage types in California State Senate Bill No. 1013, signed into law on September 28, 2022 and taking effect on January 1, 2024; since 2010 the program has been administered by the Cal/EPA California Department of Resources Recycling and Recovery (CalRecycle).

<span class="mw-page-title-main">Twirl (chocolate bar)</span> Cadbury chocolate bar

Twirl is a chocolate bar manufactured by the British chocolate brand Cadbury. Twirl was invented in Dublin by Cadbury Ireland, and launched there in 1985 as a single-finger bar. It was released in the UK two years later as a twin-finger bar. It has been marketed internationally since the 1990s and is now one of the best-selling chocolate Cadbury products. Twirl consists of two Flake-style fingers covered in milk chocolate.

A product's average price is the result of dividing the product's total sales revenue by the total units sold. When one product is sold in variants, such as bottle sizes, managers must define "comparable" units. Average prices can be calculated by weighting different unit selling prices by the percentage of unit sales (mix) for each product variant. If we use a standard, rather than an actual mix of sizes and product varieties, the result is price per statistical unit. Statistical units are also called equivalent units.

<span class="mw-page-title-main">2021–2023 inflation surge</span> Ongoing global inflation above target

A worldwide surge in inflation began in mid-2021, with many countries seeing their highest inflation rates in decades. It has been attributed to various causes, including COVID-19 pandemic-related economic dislocation, supply chain disruptions, the fiscal and monetary stimuli provided in 2020 and 2021 by governments and central banks around the world in response to the pandemic, and price gouging. Recovery in demand from the COVID-19 recession had by 2020 led to significant supply shortages across many business and consumer economic sectors. The inflation rate in the United States and the eurozone peaked in the second half of 2022 and sharply declined in 2023 and into 2024. Despite its decline, significantly higher price levels across various goods and services relative to pre-pandemic levels persist, which some economists speculate is permanent.

References

  1. 1 2 "Toblerone triangle change upsets fans". BBC News. 2016-11-08. Retrieved 2016-11-08.
  2. 1 2 3 Day, Sherri (2003-05-03). "Yogurt Makers Shrink the Cup, Trying to Turn Less into More". The New York Times.
  3. ↑ "More than 2,500 products subject to shrinkflation, says ONS". BBC News. Archived from the original on 2017-07-24.
  4. ↑ "The scourge of Shrinkflation eats away at the man in the street like a cancer!". Perpetual Traveller Overseas. Archived from the original on 2017-12-01. Retrieved 2014-06-08.
  5. ↑ "Shrinkflation: When less is not more at the grocery store". The Conversation. 2018-05-28. Retrieved 2021-09-14.
  6. 1 2 3 4 5 6 Smialek, Jeanna (2024-03-01). "Shrinkflation 101: The Economics of Smaller Groceries". The New York Times . While 'shrinkflation' gets measured, 'skimpflation' does not. Shrinking itself is captured in official inflation data, but another sneaky force that costs consumers is getting missed in the statistics. Companies sometimes use cheaper materials to save on costs in a practice some call "skimpflation." That is much harder for the government to measure.
  7. 1 2 "ECB Meets To Tackle Deflation While Ignoring Shrinkflation". London, UK: Goldcore. 2014-09-04. Retrieved 2020-07-07.
  8. ↑ "That Shrinking Feeling". Merriam Webster Dictionary. Retrieved 2019-01-21.
  9. ↑ "Do Antitrust Enforcers Know They Induce Shrinkflation?". ProMarket. 2023-08-18. Retrieved 2024-02-17.
  10. ↑ Moorthy, Vivek (2017). Applied Macroeconomics Employment, Growth and Inflation (Ist ed.). Delhi: I.K. International Publishing House Pvt.Ltd. pp. Section 3.5 The Rationale for cost based price pp 78.
  11. ↑ "Shrinkflation – Real Inflation Much Higher Than Reported". London, UK: Goldcore. 2017-06-28. Retrieved 2020-07-07.
  12. ↑ Sewraz, Reena (2017-02-21). "Shrinkflation: the food and drink items that have shrunk but aren't any cheaper". lovemoney.com. London, UK. Retrieved 2020-07-07. Ratula Chakraborty, senior lecturer in business management at the University of East Anglia, said: "Shrinkflation is a sneaky practice because consumers are not expecting any size changes so do not inspect package sizes unless there is a really noticeable difference."
  13. ↑ Studman, Anna (2019-02-23). "Shrinking products: are we paying more for less?". Which?. London, UK. Archived from the original on 2021-01-18. Retrieved 2020-07-07.
  14. ↑ "Carrefour warnt vor versteckten Preiserhöhungen". Wirtschaft. Merkur.de (in German). Münchener Zeitungs-Verlag GmbH & Co. KG. 2023-09-09. Archived from the original on 2023-09-16. Retrieved 2023-09-16.
  15. ↑ Ammann, Lucas (2023-09-15). "Erstmals warnt eine Supermarktkette vor versteckten Preiserhöhungen - Eine französische Supermarktkette hängt Warnschilder aus und warnt somit vor "Shrinkflation". Sogar ein Gesetz ist vorgesehen". Kurier (in Austrian German). Archived from the original on 2023-09-15. Retrieved 2023-09-15.
  16. ↑ "Shrinkflation: How many of our products are getting smaller?". Office for National Statistics . Retrieved 2021-03-13.
  17. 1 2 3 4 "VAT rises but food shrinks". Daily Mirror. 2010-12-19. Retrieved 2014-06-09.
  18. 1 2 York, Emily Bryson (2009-03-09). "Ben and Jerry's Calls Out Haagen-Dazs on Shrinkage". adage.com. Advertising Age. Retrieved 2015-11-22.
  19. 1 2 "Ben and Jerry's vs. Haagen-Dazs: A Pint-Sized Battle". popsugar.com. POPsugar. 2009-03-10. Retrieved 2015-11-22.
  20. ↑ "There are now TWO fewer Cadbury Fingers in every pack". 2015-04-14.
  21. ↑ "Cadbury take ELEVEN CHOCS from Heroes and Roses tubs but price stays same". Daily Express. 2015-07-20. Retrieved 2016-11-27.
  22. ↑ "Terry's Chocolate Orange doubles in price in some supermarkets". inews.co.uk. 2017-11-27. Retrieved 2019-10-24.
  23. ↑ Milka se nenápadně zmenšuje, cena ale zůstává stejná. Obalové triky jen tak nepoznáte - Aktuálně.cz
  24. ↑ "Jaffa Cakes packet size reduced in latest 'shrinkflation' move". The Guardian . 2017-09-26. Retrieved 2017-09-26.
  25. ↑ Rosalsky, Greg (2021-07-06). "Beware Of 'Shrinkflation,' Inflation's Devious Cousin". Planet Money . NPR . Retrieved 2021-07-07.
  26. ↑ Kavilanz, Parija (2022-03-08). "Your toilet paper roll is slimming down". CNN Business . Retrieved 2022-03-08.
  27. ↑ Leonard-Bedwell, Niamh. "Unilever shrinks Dove Beauty Bar packs as cost inflation bites". The Grocer. Retrieved 2023-07-31.
  28. ↑ "Visualizing Shrinkflation in Different Industries". Coventry Direct. 2023-06-06. Retrieved 2023-08-25.
  29. ↑ "Whiskas shaves 15g off packets – but still charges same price". The Telegraph. 2023-01-26. Retrieved 2023-04-07.
  30. ↑ Moorthy Vivek "Understanding Stagflation—Past and Present" McGraw Hill Education (India) 2014, pp. 79-80 ISBN   978-93-392-0334-4
  31. ↑ Rogelberg, Sasha (2024-02-13). "McDonald's CEO sees a McFlation 'battleground' with customers revolting over $8 chicken sandwiches and $3 hash browns". Yahoo Finance. Retrieved 2024-05-14.
  32. ↑ "TikTok showing $25.39 McNugget, fries bundle with no drink goes viral". KATV. 2024-04-09. Retrieved 2024-05-14.
  33. ↑ "STUDY: McDonald's prices have increased by over 100% in the last decade". WKRC. 2024-04-03. Retrieved 2024-05-14.
  34. ↑ ROGELBERG, SASHA (2024-05-14). "McDonald's may be willing to lose money on $5 meal deals if it means winning back disgruntled cash-strapped customers". Fortune. Retrieved 2024-05-14.
  35. ↑ Rosalsky, Greg (2021-10-26). "Meet skimpflation: A reason inflation is worse than the government says it is". NPR. Retrieved 2021-10-30.
  36. ↑ Osborne, Hilary (2023-07-22). "'Skimpflation': how supermarkets reduce the quality of what you buy". The Guardian. Retrieved 2023-08-11.
  37. ↑ "Biden calls out 'shrinkflation' as part of a broader strategy to reframe how voters view the economy". AP News. 2024-03-08. Retrieved 2024-03-14.
  38. ↑ Venegas, Natalie (2024-02-11). "Conservatives mock Biden's "shrinkflation" video about Super Bowl snacks". Newsweek. Retrieved 2024-03-14.
This page is based on this Wikipedia article
Text is available under the CC BY-SA 4.0 license; additional terms may apply.
Images, videos and audio are available under their respective licenses.