In economics, shrinkflation, also known as package downsizing, weight-out, and price pack architecture is the process of available products shrinking in size or quantity while the prices remain the same. The word is a portmanteau of the words shrink and inflation and was coined as the counterpart to economic inflation, wherein prices rise while the product remains unchanged. A related term, skimpflation, involves a reformulation or other reduction in quality.
Shrinkflation allows manufacturers and retailers to manage rising production costs while maintaining sales volume, operating margin, and profitability, and is often used as an alternative to raising prices in line with inflation. Some consumer protection groups are critical of the practice, but some economists defend it as a rational way to manage inflation and cost increases when customers are highly price-sensitive.
Shrinkflation is a rise in the general price level of goods per unit of weight or volume, brought about by a reduction in the weight or size of the item sold. The price for one piece of the packaged product remains the same. This sometimes does not affect inflation measures such as the consumer price index or Retail Price Index, i.e. it might not increase in the cost of a basket of retail goods and services, but many indicators of price levels and thus inflation are linked to units of volume or weight of products, so that shrinkflation also affects the statistically represented inflation figures.
The first use of the term shrinkflation with its current meaning has been attributed to the economist Pippa Malmgren, though the same term had been used earlier by historian Brian Domitrovic to refer to an economy shrinking while also suffering high inflation.
Barak Orbach, an academic economist, argues that competition typically drives shrinkflation: "When supply shocks or other factors inflate production costs, businesses must pass on cost increases to maintain profitability. However, in competitive markets, direct price increases are risky. Under such conditions, businesses often choose to raise prices indirectly through downsizing."
Without explicitly using the term shrinkflation, macroeconomist Vivek Moorthy much earlier documented and analysed the shrinkage effect of inflation, explaining it by Arthur Okun's "invisible handshake" approach: "Prices are ... based on notions of trust and fairness. it is considered acceptable for firms to respond to cost increases, but not to demand increases. Firms selling a branded product will make deliberate efforts to continue selling at the same price thereby retaining loyal customers. Hence, to cope with inflation, fast moving consumer goods firms would often resort to shrinking the product size to avoid raising prices."
Some consumer advocates are critical of shrinkflation because it has the effect of reducing product value by "stealth". The reduction in pack size is sufficiently small as not to be immediately obvious to regular consumers. An unchanged price means that most consumers will not immediately notice the higher unit price, which adversely affects consumers' ability to make informed buying choices. Consumers have been found to be deterred more by rises in prices than by reductions in pack sizes, and some customers would rather have a smaller package at the old price than the old package size at a higher price.
Suppliers and retailers have been called upon to be upfront with customers. According to Ratula Chakraborty, a professor of business management, they should be legally obliged to notify shoppers when pack sizes have been reduced. In 2023, the French grocery chain Carrefour started to warn their customers about these practises.
Corporate bodies deflect attention from product shrinkage with "less is more" messaging, for example by claiming health benefits of smaller portions or environmental benefits of less packaging.
Shrinkflation is not the only cause of reduced package sizes. In some cases, such as junk food, some customers do prefer smaller package sizes.
In other cases, the change is part of a trend to adjust package sizes. In 2003, Danone shrank its yogurt containers from 8 ounces to 6 ounces, because consumers thought their larger product was too expensive overall; many, though not all, of the grocery stores selling it maintained the old price for the smaller product. Most yogurt manufacturers followed suit, resulting in smaller packages.
In experimental psychology, a just-noticeable difference is the amount something must be changed for a difference to be noticeable. Discovered by Ernst Heinrich Weber, the JND is a fixed proportion of the reference sensory level, and so the ratio of the JND/reference is roughly constant:
where is the original intensity of the particular stimulation, is the addition to it required for the change to be perceived, and k is a constant. Weber's law has important applications in marketing. Manufacturers and marketers endeavor to determine the relevant JND for their products for two very different reasons:
When it comes to product improvements, marketers very much want to meet or exceed the consumer's differential threshold; that is, they want consumers to readily perceive any improvements made in the original products. Marketers use the JND to determine the amount of improvement they should make in their products. Less than the JND is wasted effort because the improvement will not be perceived; more than the JND is again wasteful because it reduces the level of repeat sales. On the other hand, when it comes to price increases, less than the JND is desirable because consumers are unlikely to notice it.
The UK Office for National Statistics wrote in 2019, "We identified 206 products that shrank in size and 79 that increased in size between September 2015 and June 2017. There was no trend in the frequency of size changes over this period, which included the EU referendum. The majority of products experiencing size changes were food products and in 2016, we estimated that between 1% and 2.1% of food products in our sample shrank in size, while between 0.3% and 0.7% got bigger. We also observed that prices tended not to change when products changed size, consistent with the idea that some products are undergoing 'shrinkflation'."
In the United States, the Bureau of Labor Statistics has written that "the impact of product downsizing at the all commodity and services level is minimal, with an average annual effect of 0.01 percent per year, so while consumers may notice shrinkflation at the grocery store, it has a very small impact the overall inflation picture they face."
In 2024, a bill was introduced in the U.S. Senate which would ban shrinkflation. A separate bill, introduced in the U.S. House of Representatives, would require brands to label products that contain less product than before at the same price.
In October 2021, NPR's Greg Rosalsky from Planet Money proposed the term skimpflation to refer to a degradation in the quality of services while keeping the price constant, such as a hotel offering a more meager breakfast or reducing the frequency of housekeeping. In 2023, Guardian Money described a number of ingredient changes in British supermarket foods â such as a brand of mayonnaise changing from 9% egg yolk to 6% egg and 1.5% egg yolk â as an example of skimpflation.
Unlike changes to the size and weight of a product, skimpflation is more difficult to measure in a standardized way, and consequently goes unrecorded in measurements of inflation.
Conversely, in September 2022, Izabella Kaminska's The Blind Spot published an article that proposed the term shitflation in reference to maintaining a product's price while decreasing quality. The article's author, Dario Garcia Giner, proposed that shrinkflation and shitflation spoke to the Grossman-Stiglitz paradox, and argued they were akin to "Trojan horses buried in the heart of mainstream finance â just waiting to tear down the system by discombobulating relative values in the big-data spreadsheets that central bankers and financiers depend on to manage economic allocation."
The term has been used by President Joe Biden in 2023 and 2024 to blame companies for deploying this tactic to increase their profits, deflecting criticism about inflation during his administration and instead pinning the blame on big business. Biden's claim has been criticized, with some conservatives arguing that his economic policies and the Inflation Reduction Act were the primary cause of price increases and shrinking products.