economics Economics () is the social science that studies the production, distribution, and consumption of goods and services. Economics focuses on the behaviour and interactions of economic agents and how economies work. Microeconomics analyzes ...

, 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. The word is a

portmanteau A portmanteau word, or portmanteau (, ) is a blend of wordsPippa Malmgren, though the same term had been used earlier to refer to an economy shrinking while also suffering high inflation. Shrinkflation allows companies to increase their

operating margin In business, operating margin—also known as operating income margin, operating profit margin, EBIT margin and return on sales (ROS)—is the ratio of operating income ("operating profit" in the UK) to net sales, usually expressed in percent. ...

and profitability by reducing costs whilst maintaining sales volume, and is often used as an alternative to raising prices in line with

inflation In economics, inflation is an increase in the general price level of goods and services in an economy. When the general price level rises, each unit of currency buys fewer goods and services; consequently, inflation corresponds to a reduct ...

. Consumer protection groups are critical of the practice.

Economic definition

Fineness of early Roman Imperial silver coins

Shrinkflation is a rise in the general

price level The general price level is a hypothetical measure of overall prices for some set of goods and services (the consumer basket), in an economy or monetary union during a given interval (generally one day), normalized relative to some base set ...

of goods per unit of weight or volume, brought about by a reduction in the weight or size of the item sold. The price for one piece of the packaged product remains the same or could even be raised. This sometimes does not affect

measures such as the consumer price index or

Retail Price Index In the United Kingdom, the Retail Prices Index or Retail Price Index (RPI) is a measure of inflation published monthly by the Office for National Statistics. It measures the change in the cost of a representative sample of retail goods and servic ...

, i.e. it might not increase in the cost of a basket of retail goods and services, 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.

Explanation and some related cases for India

The implicit contracts approach, captured in Okun's memorable phrase "the invisible handshake", provides a rationale for the shrinkage effect. In customer markets as distinct from auction markets, "prices are not set to match the current period profits but are rather based on multi period consideration." Instead, prices are "based on notions of trust and fairness. Such behaviour can be explained by the long-term customer seller relationship: 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." In 2008, Procter and Gamble reduced the pack size of its detergent Tide from 1 kg to 850 g while maintaining the same price. Similarly, around 2012, Orbit reduced the chewing gum pack size from 6 to 5 units, keeping the price at Rs. A dramatic example of shrinkage effect in the restaurant sector was reported in the '' Bangalore Mirror''. The full text of the article stated: "The villain of the piece here, says the hotel owners, is the rising prices of urad dal. 'We have to survive, and we cannot do it by increasing prices, so we decided to lessen the quantity'." The shrinkage effect is a hidden cost and indicates that actual inflation is higher than reported inflation. Many more cases of shrinkflation in India have occurred during the latest 2022 huge bout of global stagflation. Some companies hold the price line as much as possible by reducing grammage (another way to describe shrinkflation) while others finally let the prices rise above the magic price points – typically round numbers 1,5 10. ''

The Times of India ''The Times of India'', also known by its abbreviation ''TOI'', is an Indian English-language daily newspaper and digital news media owned and managed by The Times Group. It is the third-largest newspaper in India by circulation and largest ...

'' reported "Why FMCG companies can't shrink sachets anymore even as inflation bites". A week later, it reported on Gits Food Products, which neither raised prices nor reduced grammage. This strategy paid off with a 35% surge in sales during April--May.

Consumer impact

Consumer advocates are critical of shrinkflation because it has the effect of reducing product value by "stealth". The reduction in pack size is sufficiently small as not to be immediately obvious to regular consumers. An unchanged price means that consumers are not alerted to the higher unit price. The practice 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. Suppliers and retailers have been called upon to be upfront with customers. According to Ratula Chakraborty, a professor of

business management Business administration, also known as business management, is the administration of a commercial enterprise. It includes all aspects of overseeing and supervising the business operations of an organization. From the point of view of managemen ...

, they should be legally obliged to notify shoppers when pack sizes have been reduced. 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.

Instances of shrinkflation

* In 2010, Kraft reduced its 200g

Toblerone Toblerone ( , ) is a Swiss chocolate brand produced in Bern. Toblerone is known for its distinctive shape, a series of joined triangular prisms and lettering engraved in the chocolate. Since 2012, the brand has been owned by US company Mondele ...

bar to 170g. *

Coffee Coffee is a drink prepared from roasted coffee beans. Darkly colored, bitter, and slightly acidic, coffee has a stimulating effect on humans, primarily due to its caffeine content. It is the most popular hot drink in the world. Seeds of ...

sold in 1lb (453.6g) bags shrank to 400g or smaller in the 1980s *

Tetley Tetley is an English beverage manufacturer founded in 1837 in Yorkshire. It is the largest tea company in the United Kingdom and Canada, and the second largest in the United States by volume. Since 2000, Tetley has been a wholly owned subsidiar ...

tea bags were sold in boxes of 88 instead of 100. *

Nestlé Nestlé S.A. (; ; ) is a Swiss multinational food and drink processing conglomerate corporation headquartered in Vevey, Vaud, Switzerland. It is the largest publicly held food company in the world, measured by revenue and other metrics, since ...

reduced its

After Eight After Eight Mint Chocolate Thins, often referred to as simply "After Eights", are a brand of mint chocolate covered sugar confectionery. They were created by Rowntree Company Limited in the UK in 1962 and have been manufactured by Nestlé sin ...

Mint Chocolate Thins box from 200g to 170g. * Cadbury's

Crunchie Crunchie is a brand of chocolate bar with a honeycomb toffee (or known as "sponge toffee" in Canada and "honeycomb" or "cinder toffee" in the UK as well as "hokey pokey" in New Zealand) sugar centre. It is made by Cadbury and was originally lau ...

were sold in packs of three instead of four. * In 2003,

Dannon Danone S.A. () is a French multinational food-products corporation based in Paris. It was founded in Barcelona, Spain. It is listed on Euronext Paris where it is a component of the CAC 40 stock market index. Some of the company's products are ...

shrunk its

yogurt Yogurt (; , from tr, yoğurt, also spelled yoghurt, yogourt or yoghourt) is a food produced by bacterial fermentation of milk. The bacteria used to make yogurt are known as ''yogurt cultures''. Fermentation of sugars in the milk by these bac ...

containers from 8 ounces to 6 ounces. * In January 2009,

Häagen-Dazs Häagen-Dazs ( , ) is an American ice cream brand, established by Reuben and Rose Mattus in The Bronx, New York, in 1960. Starting with only three flavors: vanilla, chocolate, and coffee, the company opened its first retail store in Brooklyn, Ne ...

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). *

Birds Eye Birds Eye is an American international brand of frozen foods owned by Conagra Brands in the United States, by Nomad Foods in Europe, and Simplot in Australia. The former Birds Eye Company Ltd., originally named "Birdseye Seafood, Inc." had b ...

potato waffles were reduced from a 12 pack to a 10 pack *In 2015, Cadbury Fingers removed two fingers from each pack, reducing the weight of a pack from 125 grams to 111 grams. * In July 2015, a tub of

Cadbury Roses Cadbury Roses are a selection of machine wrapped chocolates made by Cadbury. Introduced in the UK in 1938 (as a competitor to Quality Street launched by Mackintosh's in 1936), they were thought to be named after the English packaging equipmen ...

which weighed 975g in 2011, was reduced to under 730g, while a tub of Cadbury

Heroes Heroes or Héroes may refer to: * Hero, one who displays courage and self-sacrifice for the greater good Film * ''Heroes'' (1977 film), an American drama * ''Heroes'' (2008 film), an Indian Hindi film Gaming * ''Heroes of Might and Magic'' ...

was reduced 695g. However the price remained the same at around £9. * In 2016,

Mondelez International Mondelez International, Inc. ( ), often styled Mondelēz, is an American multinational confectionery, food, holding and beverage and snack food company based in Chicago. Mondelez has an annual revenue of about $26 billion and operates in ...

again reduced the size of the UK 170g

bar to 150g, while the 400g bar was reduced to 360g. This was done by enlarging the gap between the chocolate triangles. * 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 2018,

Koopmans Koopmans is a Dutch occupational surname meaning " merchant's".Unilever Unilever plc is a British multinational consumer goods company with headquarters in London, England. Unilever products include food, condiments, bottled water, baby food, soft drink, ice cream, instant coffee, cleaning agents, energy dri ...

reduced the size of

Ben & Jerry's Ben & Jerry's Homemade Holdings Inc., trading and commonly known as Ben & Jerry's, is an American company that manufactures ice cream, frozen yogurt, and sorbet. Founded in 1978 in Burlington, Vermont, the company went from a single ice cream ...

ice-cream tubs in Europe, going from 500ml to 465ml, whilst still retaining the RRP of around 5 euros. Despite this, Unilever has publicly criticized rival ice-cream brands for shrinkflation in the United States, where Ben & Jerry's ice-cream is still sold in

pint The pint (, ; symbol pt, sometimes abbreviated as ''p'') is a unit of volume or capacity in both the imperial and United States customary measurement systems. In both of those systems it is traditionally one eighth of a gallon. The British impe ...

-sized (473ml) tubs. * In 2021,

Sainsbury's J Sainsbury plc, trading as Sainsbury's, is the second largest chain of supermarkets in the United Kingdom, with a 14.6% share of UK supermarket sales. Founded in 1869 by John James Sainsbury with a shop in Drury Lane, London, the company ...

replaced their 80g Spicy Thai Crackers with a 40g packet, but the price was less than halved resulting in a by-weight price increase of over 15%. * In 2021,

General Mills General Mills, Inc., is an American multinational manufacturer and marketer of branded processed consumer foods sold through retail stores. Founded on the banks of the Mississippi River at Saint Anthony Falls in Minneapolis, the company orig ...

shrunk their family-sized boxes of cereal down from 19.3 ounces to 18.1 ounces. That means the unit cost per ounce of the product has increased, but for the consumer, the average price in the United States remained $2.99 and the amount of cereal in the box looks pretty much the same to the consumer. * In 2022,

Procter & Gamble The Procter & Gamble Company (P&G) is an American multinational consumer goods corporation headquartered in Cincinnati, Ohio, founded in 1837 by William Procter and James Gamble. It specializes in a wide range of personal health/consumer he ...

reduced the number of double-ply sheets per roll of toilet paper from 264 to 244 sheets in the 18-count mega package. This amounts to approximately a roll and a half in the 18-count package. * In 2022, a Kenyan chapati maker began shrinking the size of her dough balls in half. The U.N. Development Program said rising food and energy prices caused by Covid-19 and the Russian war in Ukraine hit Sub-saharan Africa hardest.

Skimpflation

In October 2021,

NPR National Public Radio (NPR, stylized in all lowercase) is an American privately and state funded nonprofit media organization headquartered in Washington, D.C., with its NPR West headquarters in Culver City, California. It differs from other ...

's ''

Planet Money ''Planet Money'' is an American podcast and blog produced by NPR. Using "creative and entertaining" dialogue and narrative, ''Planet Money'' claims to be "The Economy Explained." History The podcast was created by Alex Blumberg and Adam Davids ...

'' proposed the term skimpflation to refer to a degradation in the quality of services while keeping the price constant, such as a

hotel A hotel is an establishment that provides paid lodging on a short-term basis. Facilities provided inside a hotel room may range from a modest-quality mattress in a small room to large suites with bigger, higher-quality beds, a dresser, a re ...

offering a more meager breakfast or reducing the frequency of

housekeeping Housekeeping is the management and routine support activities of running an organised physical institution occupied or used by people, like a house, ship, hospital or factory, such as tidying, cleaning, cooking, routine maintenance, shopping, ...

References

External links

shrinkflation.info
A website in Japanese explaining how hundreds of well-known products have been reduced in size, how much have been reduced and when they were reduced.
The impact of Shrinkflation on the CPIH: January 2012 to June 2017

Shrinkflation – the economics of stealing from customers
{{economics Inflation Deception