Grocery store shoppers notice something is wrong. Air-filled chip bags. Shrunken soup cans. Reduced detergent packages.
Companies are downsizing their products without lowering prices, and consumer posts from Reddit to TikTok to the comments section of the New York Times are brimming with outrage over the trend, commonly known as “shrinkflation.”
The practice is not new. To avoid price hikes, sellers have been quietly downsizing their products for centuries, and experts believe this has been an apparent corporate strategy since at least 1988, when Chock Full o’Nuts reduced its 1-pound coffee can to 13 ounces and competitors followed suit.
But there is great outrage today. President Biden expressed the fear in a recent video. (“What makes me most angry is that the size of the ice cream cartons has shrunk, but not the price,” he complained.) The companies themselves condemn the practice of marketing gimmicks. A Canadian chain introduced a Growflation pizza. (“In pizza terms,” the company quipped in the press release, “a bigger slice of the pie.”)
But how does shrinkflation work economically? Is it more common in the United States, and if so, does that mean official data doesn’t capture the true extent of inflation? The trend is explained below – and what it means for your wallet.
In 2016, contractionary inflation was widespread.
It may be hard to believe, but shrinkflation seems to be less common today than it was a few years ago.
The government is adjusting official inflation data to account for product downsizing, and data collectors who monitor resizing have found fewer cases of shrinking household goods and food in 2023 than several years earlier.
In 2016, when headline inflation was low, staff cuts were common. It became less common after the pandemic began in 2020 and more recently has begun to return to pre-pandemic levels, Bureau of Labor Statistics analysts said. (The economists noted that the amount of products measured varied somewhat over the years, so comparisons over time represent a rough approximation rather than an exact science.)
However, for some products the extent is now more extreme.
Although downsizing isn’t as common, shrink-flation is now having a big impact on some key categories, including candy, laundry detergent and toilet paper.
From 2019 to 2023, shrinkage contributed about 3.6 percentage points to inflation in products like paper towels and toilet paper, up from 1.2 percentage points from 2015 to 2019. Shrinkage has also contributed more to price increases in both candy and candy in recent years Contributed to cleaning products.
For snacks, shrinking sizes contributed 2.6 percentage points to inflation, roughly equal to their contribution from 2015 to 2019. The government has not yet released an analysis of how much contraction inflation contributed to overall inflation from 2019 to 2023.
While “shrinkflation” is measured, “skimpflation” is not.
The contraction itself is captured in official inflation data, but another insidious force that imposes costs on consumers is not reflected in the statistics. Companies sometimes use cheaper materials to save costs, which some call “skimpflation.” This is much harder for the government to measure.
If your paper towel roll costs the same, but you get fewer sheets – shrinkage inflation – this is clearly reflected in an increase in the unit cost, which is added to the official inflation. If your paper towels are the same size but suddenly made of inferior material – skimplation – the government doesn’t record it as inflation.
In fact, food and household products, by and large, are not directly adjusted for changes in quality other than size and weight, government statisticians said. So if your microwave meal brand starts using vegetable oil instead of olive oil, or if your formerly resealable package loses its zipper, it won’t show up.
Companies do this because it works.
Companies choose to make their products smaller rather than charge more for one simple reason: consumers often pay more attention to price than size.
When the volume drops, “people may notice, but often they don’t notice,” said John Gourville, a professor at Harvard Business School. “You don’t get sticker shock.”
In one famous example, Dannon sold yogurts in larger containers than its competitor Yoplait—8 ounces instead of six. Consumers were convinced that Dannon’s yogurt was more expensive, without taking into account the fact that it was simply larger. Ultimately, Mr. Gourville said, the company gave in and reduced its packaging.
“Sales of Dannon’s yogurt, which fell immediately after the size reduction, have since increased,” The Times reported in 2003. “And Dannon now makes a bigger profit for every cup of yogurt sold.”
Not all resizing is created equal. Some of these can be done stealthily, such as enlarging a depression in the bottom of a glass or cutting off the corners of a bar of soap. Consumers have a particularly difficult time detecting size changes when they occur in three dimensions, said Nailya Ordabayeva, an associate professor at Dartmouth’s Tuck School of Business, who has studied consumer reactions.
“The brain is programmed to perform simpler heuristics,” she explained.
Additionally, consumers may be willing to accept, or in some cases even prefer, smaller quantities, she noted. Junk food products have been temporarily shrunk to reduce calorie content, for example.
Nevertheless, consumers could hold back.
If companies only care about their profits and not their customers, some pricing experts worry that continued contraction could scare away buyers.
As raw material costs rose and inflation hit the headlines, consumers most likely realized that companies would have to pass on some of these increases. They may have even preferred smaller products to higher prices, several experts said.
But overall inflation is now cooling: after peaking at 9.1 percent in July 2022, it fell to 3.1 percent in January. And consumers may be less willing to accept contractionary inflation because companies now face less severe cost pressures, particularly because food companies’ profits have been high and, in many cases, continue to be high.
They may simply feel betrayed.
“I imagine consumers are becoming more and more aware of shrinkflation,” said Jun Yao, a marketing lecturer at Macquarie University in Australia who has studied the trend.
And as more chains and online retailers list unit costs, shoppers may be more attuned to sizing, Mr. Yao said, an awareness that could counter future shrinkage.
The practice, he said, “can backfire — and damage the brand image.”
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2024-03-01 10:02:52
www.nytimes.com
