Shoppers at the grocery store notice something amiss. Bags of chips filled with air. Shrinkable soup cans. Reduced detergent packaging.
Companies are cutting back on products without cutting prices, and consumer posts from Reddit to TikTok to the New York Times comments section are dripping with outrage at the trend, popularly known as “shrink inflation.”
The practice is not new. Sellers have been quietly shrinking products to avoid price hikes for centuries, and experts believe it’s been an obvious corporate strategy since at least 1988, when Chock Full o’Nuts shrunk its one-pound box of coffee to 13 ounces and competitors followed suit.
But the rage today is intense. President Biden tapped into the angst in a recent video. (“What angers me the most is that ice cream cartons have indeed shrunk in size, but not in price,” he lamented.) The companies themselves dismiss the practice as marketing gimmicks. A Canadian chain has unveiled a pizza to boost inflation. (“In pizza terms,” quipped the company’s press release, “a bigger slice of the pie.”)
But how does shrinking inflation work, financially? Is it happening more often in the United States, and if so, does that mean the official figures are not capturing the true extent of inflation? Here’s an explanation of the trend — and what it means for your wallet.
Contraction inflation was rampant in 2016.
It may be hard to believe, but deflation seems to be happening less often today than it did a few years ago.
The government adjusts official inflation figures to account for product downsizing, and data collectors tracking size adjustments found fewer instances of household goods and groceries shrinking in 2023 than a few years earlier.
Contraction was common in 2016, when headline inflation was low. It became rarer after the pandemic began in 2020 and more recently began to return to pre-pandemic levels, analysts from the Bureau of Labor Statistics said. (Economists have noted that the set of products being measured has changed somewhat over the years, making comparisons over time more of a rough approximation than an exact science.)
But the size for some products is more extreme now.
Even if shrinking doesn’t happen as often, shrinking inflation today has a big impact on a few key categories, including candy, detergents and toilet paper.
From 2019 to 2023, the contraction added about 3.6 percentage points to inflation for products such as paper towels and toilet paper, up from 1.2 percentage points from 2015 to 2019. The contraction also contributed more to price increases in both confectionery as well as cleaning products in recent years.
For snacks, shrinks added 2.6 percentage points to inflation, roughly in line with how much they contributed from 2015 to 2019. The government has yet to release a breakdown of how much shrink inflation contributed to overall inflation from 2019 to 2023.
While “shrinkage” is measured, “microinflation” is not.
The contraction itself is captured in the official inflation figures, but another insidious force costing consumers is lost in the statistics. Sometimes companies use cheaper materials to save costs in a practice some call “scum inflation.” This is much more difficult for the government to measure.
If your roll of paper towels costs the same but you get fewer sheets – shrinkage – this clearly shows up as an increase in unit cost added to official inflation. If your napkins are the same size, but suddenly they’re made of worse material—tick—the government doesn’t record it as inflation.
In fact, food and household products in general are not readily adjusted for quality changes other than size and weight, government statisticians said. So if your microwave dinner brand starts using vegetable instead of olive oil, or if the previously resealed package loses its zipper, it won’t show up.
Companies do this because it works.
Companies choose to shrink their products rather than charge more for one simple reason: Consumers often pay more attention to prices than sizes.
When quantity decreases, “people may notice, but often they don’t,” said 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 competitor Yoplait — eight ounces versus six. Consumers were convinced that Dannon’s yogurt was more expensive, not realizing that it was simply bigger. Eventually, Mr. Gourville said, the company relented and shrunk its packaging.
“Sales of Dannon yogurt, which fell immediately after the downsizing, have since rebounded,” the Times reported in 2003. “And Dannon now earns more profit on every cup of yogurt it sells.”
Not all resizes are created equal. Some can be subtle, like enlarging an indentation in the bottom of a jar or shaving the corners off a bar of soap. Consumers have a particularly hard time recognizing size changes when they occur in three dimensions, said Nailya Ordabayeva, an associate professor at Dartmouth’s Tuck School of Business who has studied consumer reactions.
“The brain is hard-wired to make simpler heuristics,” he explained.
In addition, he noted, consumers may be willing to accept smaller quantities or even prefer them in some cases. Junk food products have occasionally been shrunk to reduce calorie counts, for example.
However, consumers may push back.
When companies only care about their profits — not their consumers — some price experts worry that persistently shrinking inflation could drive away shoppers.
When the cost of raw materials was rising and inflation was in the headlines, consumers probably understood that companies had to pass on some of those increases. They may even prefer smaller products to higher prices, several experts said.
But now, headline inflation has eased: After peaking at 9.1% in July 2022, it had fallen to 3.1% in January. And consumers may be less willing to accept shrinking inflation now that businesses face less severe cost pressures, especially since food company profits have been — and in many cases remain — high.
They may just feel ripped off.
“I can see consumers becoming increasingly aware of the existence of shrinking inflation,” said Jun Yao, a marketing lecturer at Macquarie University in Australia who has studied the trend.
And as more chain and online retailers announce unit costs, shoppers may be more attuned to size changes, Mr. Yao said, an awareness that could offset future shrinkage.
The practice, he said, “can backfire – and damage the brand’s image.”
