Shrinkflation 101: The Economics of Smaller Groceries

Supermarket shoppers notice something is wrong. Air-filled bags of chips. Shrunken soup cans. Less detergent packaging.

Companies downsize products without lowering prices, and consumer items from Reddit Unpleasant TikTok the comments section of the New York Times is dripping with outrage over the trend, commonly known as “shrinkflation.”

The practice is not new. Sellers have been quietly downsizing products to avoid price increases for centuriesand experts think this was an obvious one business strategy at least since 1988, when Chock Full o’Nuts reduced its one-pound coffee can to 13 ounces and its competitors followed suit.

But the outrage today is acute. President Biden took advantage of the fear in a recent video. (“What angers me most is that ice cream cartons have shrunk in size, but not in price,” he complained.) Companies themselves are pushing back against this practice with marketing gimmicks. One Canadian chain unveiled a grow pizza. (“In pizza terms,” the company press release joked, “a bigger slice of the pie.”)

But how does shrinkflation work economically? Does this happen more often in the United States, and if so, does it mean that official data is failing to capture the true extent of inflation? Below you’ll find an explanation of the trend – and what it means for your wallet.

Shrinkflation was rampant in 2016.

It may be hard to believe, but shrinkflation seems to be less common these days than it was a few years ago.

The government adjusts official inflation data to account for product shrinkage, and data collectors monitoring for size adjustments have noted fewer cases of shrinking household goods and groceries in 2023 than a few years earlier.

Reduce occurred frequently in 2016, when headline inflation was low. The disease became rarer after the pandemic began in 2020, and recently has begun to return to pre-pandemic levels, according to analysts at the Bureau of Labor Statistics. (The economists noted that the range of products being measured changed somewhat over the years, making comparisons over time more of a rough approximation than an exact science.)

But for some products the scale is now more extreme.

Even if downsizing isn’t happening as much, shrinkflation is having a big impact today in a number of key categories, including candy, laundry detergent and toilet paper.

From 2019 to 2023, the contraction has added about 3.6 percentage points to inflation for products like paper towels and toilet paper, up from 1.2 percentage points between 2015 and 2019. The contraction inflation has also contributed more heavily to the price increases of both candy and cleaning products. .

For snacks, shrinking sizes contributed 2.6 percentage points to inflation, roughly in line with the contribution they made between 2015 and 2019. The government has not yet released an analysis of the extent to which shrinking inflation has contributed to headline inflation between 2019 and 2023.

While ‘shrinkflation’ is measured, ‘skimpflation’ is not.

The contraction itself is captured in the official inflation data, but another sneaky force costing consumers dearly is being overlooked in the statistics. Companies sometimes use cheaper materials to cut costs, in a practice some call “skimpflation.” That is much more difficult for the government to measure.

If your paper towel roll costs the same but you get fewer sheets – shrinkflation – then that is clearly reflected in an increase in unit costs added to official inflation. If your paper towels are the same size but suddenly made of worse material – skimpflation – the government doesn’t record that as inflation.

In fact, food and household products generally do not adjust directly to changes in quality other than size and weight, government statisticians say. So if your microwave dinner brand starts using vegetables instead of olive oil, or if your previously resealable package loses the zipper, that won’t show up.

Companies do this because it works.

Companies choose to downsize their products, rather than charge more, for a simple reason: consumers often pay more attention to prices than sizes.

When the quantity drops, “people may notice it, but often they don’t,” says John Gourville, a professor at Harvard Business School. “You don’t get sticker shock.”

In one famous example, Dannon sold yogurt in larger containers than its competitor Yoplait: eight ounces versus six. Consumers were convinced that Dannon’s yogurt was more expensive, but did not realize that it was simply larger. Eventually, Mr. Gourville said, the company relented and shrank the packaging.

“Sales of Dannon’s yogurt, which fell immediately after the downsizing, have since recovered,” The Times reported in 2003. “And Dannon now makes a bigger profit on every cup of yogurt it sells.”

Not all size changes are created equal. Some can be surreptitious, such as enlarging the notch in the bottom of a jar or shaving off the corners of a bar of soap. Consumers have a particularly difficult time recognizing size changes when they occur along three dimensions, says Nailya Ordabayeva, an associate professor at the Tuck School of Business at Dartmouth, who has studied consumer responses.

“The brain is programmed to perform simpler heuristics,” she explained.

Additionally, she noted, consumers may be willing to accept or in some cases even prefer smaller quantities. Junk food products are sometimes shrunk to reduce calorie counts, for example.

Still, consumers can opt out.

When companies focus only on their profits — and not their consumers — some pricing experts worry that continued contraction could drive shoppers away.

When commodity costs rose and inflation made headlines, consumers most likely understood that companies needed to pass on some of those increases. They may even have preferred smaller products to bigger price tags, several experts say.

But now overall inflation is cooling: after peaking at 9.1 percent in July 2022, it had declined to 3.1 percent as of January. And consumers may be less willing to accept contraction as companies face less severe cost pressures, especially as food companies’ profits – and in many cases it remains that way – high.

They may just feel ripped off.

“I see consumers becoming more aware of the existence of shrinkage inflation,” says Jun Yao, a marketing lecturer at Macquarie University in Australia who has studied the trend.

And as more chains and online retailers adopt unit costs, consumers may be more attuned to size changes, Mr. Yao said, a realization that could fortify against future contractions.

This practice, he said, “can be counterproductive and damage the brand image.”