From bread for toast to chocolate bars, companies are hiding rising costs due to inflationary pressures by downsizing many everyday products.
For companies it is a way to maintain high operating profit margins, for consumers a constant cause for concern and for statistical agencies a real headache. The reason for the phenomenon of shrinkflation, i.e. the tendency to reduce the quantity of the product per package while maintaining the same price.
For example, where you used to buy a 500 gram package of cereal, there is now a new 450 gram package at the same price. You automatically feel like you haven’t lost anything since you’re paying the same. However you have actually paid 11.1% more.
How did the phenomenon begin?
The phenomenon gained a lot of publicity in Britain in 2016, when the company that produces well-known Swiss chocolates reduced the weight of the 400-gram package to 360 grams and the 170-gram package to 150 grams, while keeping the same price. Except she did it by increasing the space between her trademark chocolate triangles, and consumers took notice immediately.
And if in this case the reduction in quantity was easily noticed, with the relevant photos circulating on the Internet, in other cases consumers simply bought smaller quantities, especially in products where the key element is trust in the specific brand. And this is because we usually go to buy “a package” or “a box” of a product we prefer and not a quantity in grams. Nor do we consider the length (or thickness) in the roll of toilet or kitchen paper we bought.
In 2019, the UK Office of National Statistics announced that around 206 products shrank in packaging size between September 2015 and June 2017, several of them highly recognizable.
At the time, the British statistics office had estimated that the percentage of food products in the sample it uses to calculate the Consumer Price Index that saw a reduction in the quantity per package was between 1% and 2.1%. But it admitted it didn’t have the full picture, recording size and weight details for about half of the 37,408 products it collects data on each month.
Data from the United States
The issue has also concerned the Bureau of Labor Statistics, the federal agency that collects the data for the Consumer Price Index in the United States. A recent article on the BLS website (https://bls.gov) explains the dimensions of the problem, noting how difficult it is for consumers to spot the change, especially when the quantity reduction is combined with a new package design that is often perceived as an upgrade rather than a contraction.
The BLS insists that its sampling takes into account changes in the quantity of packaged goods. When there is a reduction in the quantity in the package while maintaining the same price, this is calculated as an increase and thus contributes to the estimation of the Consumer Price Index. Accordingly, when the quantity per package increases without a corresponding increase in price, then it is considered a decrease in the price of this product.
For the period 2015-2021, the BLS recorded that household paper products had the most changes in size per package with 716 related reports, followed by snacks with 509 reports. However, the percentage in the total number of products measured was relatively small: about 3% for paper products and 2.9% for food.
The effect on inflation
But what is the impact of these practices on the Consumer Price Index? The BLS estimates that in the total goods and services CPI the increase is about 0.01%.
However, there are product categories where the price impact due to changes in package size is greater: +2.81% for the period 2015-2019 in baby food, +2.64% in snacks, +1.59% in yeast products, + 1.35% for candy and chewing gum, and +1.30% for household paper products. And these are increases only from changes in size.
These numbers may seem relatively small, but they are not negligible, especially for people facing food insecurity. Then even small increases in product prices have big impacts, while reductions in the quantities of products needed per package simply mean they will buy smaller amounts of food, baby food and basic household cleaning products.