Shrinkflation: Sneaky or Not?

By Ashna Ranade

Every Indian child would have fond memories of having Parle G biscuits, Dairy Milk Chocolates or Maggi Noodles. The prices of these infamous junk items, which start at INR 10, have been the same for all these years. Certainly, over a period of time, as manufacturing costs rise, so should the selling prices. Wondering why that is not the case, or if it is your eyesight or are some staples in your shopping trolley really getting smaller? Don’t worry, it’s not your eyes. It’s not an illusion but the tactic of downsizing, often referred to as the phenomenon of shrinkflation. Many of these adjustments are minor, such as making candy bars sold in multipacks smaller than those sold separately, or altering the design of their products such that the weight difference is barely noticeable.

Take, for example, Mondelez International’s Cadbury Dairy Milk bar. In 2011, the company reduced the bar’s chocolate content by two squares while maintaining the same pricing. They claimed growing costs at the time. Further, they rounded the corners of the bar in 2013, decreasing the weight (Bloomberg, 2014). When raw materials become more expensive, companies may respond by charging the same amount for a package that contains somewhat less. It’s a type of downsizing that defies the decades-old tendency of supersizing, and its impacts can be seen in practically every grocery store aisle. They may also do so as a result of cost pressures in their own supply chains, such as increased ingredient costs, growing labour expenses, or long-term inflation. Faced with rising commodity prices like oil and flour, food corporations are reducing pack sizes and raising checkout prices, adding to the wave of inflationary pressures hitting people (Meisenzahl, 2021). Shrinkflation was always prevalent, but as a result of the COVID-19 pandemic, it is expected to worsen due to rising labour costs and ingredient prices, as well as soaring demand and a transportation difficulty. 

Shrinkflation is the latest in a long line of phrases like slumpflation and stagflation, and there are sure to be more in the future as experts try to figure out what’s wrong in current day pricing strategies. It’s a phenomenon, according to economist Pippa Malmgren, a former adviser to President George W Bush, where firms charge consumers the same, or more, for less in return. That could signal a price increase, something she’s been warning consumers about, for a long time. In the 1970s, just before inflation became a serious problem, items were shrunk in size (Gupta et al., 2006). Brian Domitrovic uses shrinkflation to contrast stagflation in his 2009 book, ‘Econoclasts: The Rebels Who Sparked the Supply-Side Revolution and Restored American Prosperity’, which is persistent inflation combined with stagnant consumer demand and relatively high unemployment. As he puts it, “Following WWII, the United States experienced an extreme period of stagflation in exchange for depression. Actually, it was a case of shrinkflation, in which the economy shrank while prices rose.” Recent proof of this usage has not been observed; it’s Malmgren’s definition that has exploded in popularity in recent years. 

Simply said, the sticker price of a product remains the same but the product’s size is lowered, resulting in an increase in the item’s unit price. Most consumers, including you and me, are considerably more likely to compare prices. While a slight price adjustment in an item makes us reconsider purchasing it, a similar size reduction rarely has the same effect. As a result, the producers employ this method to keep clients buying their goods, although at a higher unit price, without their knowledge. Often, experts have also referred to shrinkflation as ‘capitalism’ at its best (Khan, 2019).

Today, shrinkflation is frequently used by marketers to achieve an unseen price rise for their products in a market defined by ‘hyper-competition.’ Although marketers may argue that providing the legally required quantity indication on the package is sufficient for customers to make rational and informed decisions, research shows that consumers frequently ignore quantity indications on packages and instead rely on other methods (e.g., visual impressions of package size, total package price, or previous purchase experience) to judge product quantity and value. As a result of an unfavourable balance of information within the dyad, package reduction has the potential to mislead clients in the buying process. This could lead to major moral and ethical concerns (Boyle, 2015). 

The ethical question surrounding shrinkflation is whether or not it is the marketers duty to specifically uniform consumers about changing size of the product. The answer in fact is no. Businesses tend to follow the shareholder’s law of increasing profits while it is the duty of a consumer to thoroughly examine the product before making the purchase. The amount of companies working on reduced size flagging is extremely rare, as the stakes of losing out on potential customers for them are too high. In a study conducted by Boyle in 2015, it was observed that only 8% of consumers react to weight specific details while making their purchases, therefore a striking majority of 92% would only notice the price before making their choice. This works out in favour of manufacturers choosing to not reveal the change in weight data in their marketing processes. Ultimately, it is the duty of the marketers to be honest and fair to their customers, however, their practice of knowingly participating in marketing tactics in conflict of interest without notice to consumers involved is only fair. Thus, this method is what they opt for to maintain a balance between keeping their shareholders as well as customers satisfied. The sneaky character of the adjustment, as well as brands being caught  by consumer groups, account for much of the brand damage connected with shrinkflation. 

References:

Bloomberg. (2014, September 5). Less beer in your bottle? Blame “shrinkflation.” The Economic Times. https://economictimes.indiatimes.com/magazines/panache/less-beer-in-your-bottle-blame-shrinkflation/articleshow/41761102.cms?from=mdr

Boyle, J. (2015). The Ethics Of Shrinkflation. Prezi.Com. https://prezi.com/k4h2numrhket/the-ethics-of-shrinkflation/#:%7E:text=Shrinkflation%20is%20morally%20wrong%20as,can%20therefore%20not%20be%20justified.&text=Producers%20Options%3A,prices%20to%20cover%20increased%20cost

Butler, S. (2021, October 8). Smaller packs, same price: curse of ‘shrinkflation’ hits shoppers’ baskets. The Guardian. https://www.theguardian.com/business/2021/oct/08/watch-out-for-hidden-shrinkflation-price-hikes-analysts-warn

Ermey, R. (2021, October 25). Shrinkflation: How a “pretty sneaky” tactic means you “get less product for the same price.” Grow from Acorns + CNBC. https://grow.acorns.com/what-is-shrinkflation/#:%7E:text=By%20employing%20the%20third%20tactic,raising%20prices%2C%E2%80%9D%20she%20says.

Gupta, O. K., Tandon, S., Debnath, S., & Rominger, A. S. (2006). Package downsizing: is it ethical? AI & SOCIETY, 21(3), 239–250. https://doi.org/10.1007/s00146-006-0056-3

Khan, F. (2019, January 30). What is Shrinkflation & its economic impact. Data Driven Investor.https://www.datadriveninvestor.com/2019/01/30/what-is-shrinkflation-its-economic-impact/

Meisenzahl, M. G. D. (2021, July 16). Shrinkflation is happening across grocery stores – here are 14 of the most extreme examples, from toilet paper. Business Insider. https://www.businessinsider.in/retail/news/shrinkflation-is-happening-across-grocery-stores-here-are-14-of-the-most-extreme-examples-from-toilet-paper-to-candy-bars/slidelist/84480352.cms#slideid=84480898

Oakley, M. (2021, November 30). The Frustration Surrounding Shrinkflation. Una. https://una.com/resources/article/shrinkflation/

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s