Two bars of the Toblerone Swiss chocolate are shown, at front is the new style 150 gram bar showing the reduction in triangular pieces, in the background is the older style 360 gram bar, pictured in London, on Nov. 8, 2016.Alastair Grant/The Associated Press
David Jones is a policy analyst and economist. He is a fellow at the Canadian Centre for Health Economics, a Telus research fellow and is studying public policy at the Munk School of Global Affairs & Public Policy, University of Toronto.
Canada’s biggest grocers are on the naughty seat right now as shoppers voice their outrage over surging food costs. But there’s one result of the pandemic and inflation that shoppers can’t lay at their feet: shrinkflation.
Unlike many portmanteaus, the term shrinkflation is no source of amusement. It is used to describe the reduction of a product’s size without a corresponding reduction in its price. In some cases, grocery products shrink in size while also increasing in price – a double whammy to the pocketbook.
When basic living essentials take a bigger chunk out of the household budget while families struggle with other costs of living, it’s no surprise that consumers are riled.
Shrinkflation is not a new corporate strategy. Ultimately, when firms’ input costs rise – as they have done in recent years – this cost pressure needs to be passed on somewhere. Barring cuts to dividends or executive remuneration packages, this leaves a company two options: shrinkflation or higher prices.
It turns out we may actually prefer shrinkflation, with some research showing that we react less negatively to shrinkflation than to higher prices. For example, an experiment in Australia trialled several different fully transparent pricing and sizing strategies and found that a price increase was the option least preferred by shoppers.
Shrinkflation is not always the optimal approach. Treats such as ice cream may start to incur tax when downsized to the point where they are considered single-sized servings. This is yet another way in which consumers feel the double whammy of a smaller size and higher price. Shrinkflation also increases the waste produced by packaging, which is detrimental to climate change mitigation efforts.
But, surprisingly, shrinkflation has some upsides. For one thing, it takes away the least valuable part of the product. Imagine eating a pack of Oreos. The first ones are tantalizing, but by the end of the package an additional cookie grants less additional satisfaction. In economics parlance, this is called diminishing returns.
From a psychology perspective, you’d feel better losing those end-of-packet Oreos, versus retaining them and paying more. (You’d probably feel better eating fewer Oreos, too, but that is a whole other story.)
As much as we feel frustrated by shrinkflation, the real source of our outrage is “sneakflation,” whereby companies appear to sneakily downsize their products. For example, we buy a familiar-looking box of cereal, only to find its contents more closely resemble an airbag. It is borderline insulting.
There are plenty of examples online. Toothpaste tubes now come in ludicrously oversized packages to hide the reduced amount of product inside. In England, a box of teabags went from 240 to 210 bags by subtly changing the wording on the packaging from “50% extra bags” (for the 160-unit-packages) to “50 extra bags.” You almost have to applaud the ingenuity.
But it doesn’t have to be this way. For example, Tillamook Ice Cream – a U.S. company – chose to clearly inform its customers that it would be downsizing its product owing to rising costs.
As consumers, we should also take some responsibility. In a recent U.S. survey, 75 per cent of people had noticed shrinkflation occurring, and almost 50 per cent stated they would buy a different brand as a result. Consumers need not feel helpless.
Shrinkflation may be the “least worst” option for now. I just have one ask: If Mr. Pringle needs to reduce the size of his delicious chips, he should at least have the decency to look me in the eye and say it to my face.