By Noah Rothstein
Due to the inflation surge, many consumer product brands and grocery stores have been affected by a tactic known as “shrinkflation,” where manufacturers reduce the size of their products but often have the same prices.
When costs rise, manufacturers of consumer goods look for ways to offset the increases they are paying for commodities, transportation, labor, and other expenses. They usually raise prices on existing products or whittle down the sizes of their goods, thereby increasing the price per unit. Those increases are then passed on to consumers via stores, who purchase products from consumer goods companies.
Consumers are sensitive to price hikes, and to keep consumers from reacting negatively, brands may clandestinely make smaller boxes for shelves or take a few sheets out of a toilet paper roll or paper towel.
“Consumers are price-conscious. They will notice if an orange juice manufacturer, for example, raises the shelf price from $2.99 to $3.19,” said Edgar Dworsky, a former assistant attorney general in Massachusetts and longtime consumer advocate who tracks product downsizing on his website ConsumerWorld.org. “If the manufacturer makes the carton of orange juice several ounces less in each carton, they know consumers may not catch it. And that’s because consumers are not net weight conscious.”
According to Dworsky, he went to a grocery store last week in Massachusetts where a Cocoa Puffs’ family size box had dropped from 19.3oz. to 18.1oz., while Cinnamon Toast Crunch had fallen from 19.3oz. to 18.8oz. The new, smaller boxes were $3.99, the same price as the larger boxes. That means consumers lost a bowl of cereal when they purchased the new size.
Most companies often don’t come out and say they are shrinking the sizes of their products. Instead, they’ll say things like they are modifying their “price-pack architecture.”
There’s been a lot of talk of such changes recently, with inflation on the rise and companies announcing price hikes.
Tillamook, a creamery in Oregon, announced that it reduced its family-size container of ice cream from 56oz. to 48oz. because of higher costs for ingredients like berries while keeping the price the same.
Some consumer goods analysts expect companies to further reduce package sizes because of higher costs.
According to the Labor Department, the producer price index, which measures prices paid by businesses, rose 7.3% in June from a year ago. The June rise was the largest since the government started tracking 12-month data in November 2010.
Nik Modi, a consumer goods analyst at RBC Capital Markets, said in an email that he anticipates downsizing to be “a big initiative for most [consumer product] companies as part of their revenue growth management strategies.”