The last time you were out shopping, you may have noticed that the packaging for some of your favourite items were a tad smaller. Or that the price of what you used to buy is now more than the last time you were shopping?
We are all familiar with inflation, the rising of prices, or in economic terms, the devaluation of your money. Some consumers may have noticed a different type of inflation – the price of an item has not increased, but the amount in the package has been reduced.
This practice is known as shrinkflation, or more formally, “contents strategy reduction.” The practice involves the reduction in the size (or quantity) of a product while maintaining the product’s price, essentially increasing the price per measure of the product.
This neologism seems to have appeared around 2009 following the publication of Brian Domitrovic’s book titled Econoclasts: The Rebels Who Sparked the Supply-Side Revolution and Restored American Prosperity. In his book, Domitrovic used the term shrinkflation to differentiate a different process than stagflation (the simultaneous appearance of slow economic growth, high unemployment, and rising prices in an economy). However, the term shrinkflation would not gain much popularity until 2016, after American economist Pippa Malmgren used the term in her republished book Signals: How Everyday Signs Can Help Us Navigate the World’s Turbulent Economy. Malmgren defined shrinkflation as a type of disguised inflation that was responsible for the straining of household budgets.
Since then, mainstream media has been all over the new buzzword covering the phenomenon of shrinkflation, mostly by defining it over and over again and providing shocking (or not so shocking) examples. This coverage has caused many consumers around the world to become quite alarmed and angry with many popular consumer brands. In many consumers’ eyes (and mainstream media portrayals), businesses that engage in “content reduction strategies” are dishonest and underhanded.
Many consumers have inundated their local consumer-protection authorities with complaints, so much that in countries like Germany, the German Statistics Office has taken to employing “price collectors” to track and monitor more than 300,000 goods and services each month and make a note of the volumes and prices being offered.
In the United States, consumers have taken to proliferating social media networks exposing top brands and warning their fellow consumers of such underhanded and dishonest practices. Some reports included the reduction of the number of tissues in a small box from 65 down to 60 (Kleenex), Yogurt packaging that has shrunk from 5.3 ounces down to 4.5 ounces (Chobani Flips yogurt), and Toilet paper rolls being shortened by 8%, only having 312 sheets instead of 340 sheets (Cottonelle Ultra Clean Care), and Coffee containers being downsized from 51 ounces to 43.5 ounces (Folgers).
In the United Kingdom, coffee tins have shrunk from 100 grams down to 90 grams (Azera Americano). In fact, the Office for National Statistics in the U.K. has discovered approximately 2,529 examples of shrinkflation between 2012 and 2017.
Here in Canada, consumers may also be noticing that many domestic brands have engaged in the practice of “content reduction” across a variety of products, including chips, chocolate, pet food, garbage bags, and toilet paper. Avid price watchers have accused companies of employing a variety of tricks to draw consumers’ attention away from the downsizing practices, such as using bright new labels that draw consumers’ attention away from the smaller package markings.
From some companies’ point of view, they have chosen to reduce the packaging size instead of hiking the price, as they believe that by hiking the price, the consumer will stop purchasing their product and purchase another brand. In economics lingo, it’s called substitution.
Companies maintain that in environments where their costs are rising, the only way they can maintain their price points is by shrinking their packages. For example, making candy bars that are sold in multipacks of smaller sizes rather than single larger ones individually, or changing, in other cases, changing the shape of packing such that the consumer barely notices the difference in weight.
While consumers and governments may be concerned about these practices, research has demonstrated these practices are actually what consumers prefer. In studies conducted on shrinkflation, experts tested consumers to see which scenario a consumer would prefer. The consumers were exposed to the following four scenarios over a number of weeks on products that they regularly purchased:
|only the price had increased.
|the price remained the same, but the size had been reduced
|the size of the product increased, but the price increased even more.
|the product’s price had been reduced, but the size had been reduced even more (shrinkflation variant).
Consumers most preferred the shrinkflation variant (Scenario 4), then Scenario 3, then Scenario 2, and they preferred Scenario 1 the least. What these results reaffirm is what is referred to as the “framing effect” (in psychology lingo). The framing effect is wherein an individual’s choice from a set of options is influenced more by how the information is worded than by the information itself. In other words, people decide on options based on whether the options are presented with positive or negative connotations (i.e. as a loss or as a gain).
Surprising, perhaps not. Consumers simply value losses and gains differently. Since price is more noticeable and is given more weight than size, shoppers are far more influenced by a change in price than they are by a reduction in package size.
As the world continues to emerge from the fallout of COVID-19 and COVID-related market interventions, many companies have watched as their costs have escalated due to supply bottlenecks, labour shortages, etc., and this has put pressure on companies to start increasing product prices. In many countries around the world, consumers (in particular, the younger generations of consumers) are experiencing inflation rates that they never experienced before, and for the older generations of consumers have not experienced such sharp increases in price in quite a while.
|Average Annual Inflation Rates
Increasing product prices or “content reduced strategies” have caused many concerned consumers and some mainstream/social media pundits to perceive shrinkflation as sneaky, although most producers provide the pricing information for the product which may or may not include the price per unit. So there is nothing necessarily hidden from the consumer, even though in Canada, merchants are not legally obligated to display the price per unit for items, except in Quebec. The fact remains any disgruntled consumer who is no longer happy with the unit price always has the option to choose a substitutable product or simply just not buy.
Perceived as sneaky or not, the simple fact is rising prices have a real impact on consumers, especially those consumers whose incomes are fixed or do not keep up with the inflation rate.
Whether consumers are paying a higher price for the same item or fretting over the missing Smarties from the box, we are all subject to inflation.