The rise of shrinkflation: consumer trust shrinks in tandem with products

As shoppers become increasingly vigilant in the grocery aisle, they are likely to notice a price hike on their favorite cereal box. They are less likely, however, to notice the loss of a few grams if the price of the cereal remains the same. This is known as “shrinkflation,” when a brand shrinks the size, quantity or quality of a product while mainting the same price tag.

Although shrinkflation is not a new concept, social media is actively exposing the practice to a wider audience. Earlier this week, a viral post from Cookie Monster prompted a real response from the White House.

C is for consumers getting ripped off.

President Biden is calling on companies to put a stop to shrinkflation. https://t.co/4bkX8o3irI

— The White House (@WhiteHouse) March 4, 2024

Not many household brands are safe from the scrutiny.

It's not just cookies. Gatorade got 12% smaller. Wheat Thins got 12% smaller. Doritos got 5% smaller. Corporations are shrinking products to squeeze more money out of Cookie Monster and everyone else. C is for corporate greed. https://t.co/HEg6JMDOzt — Robert Reich (@RBReich) March 4, 2024

As consumers become more discerning, corporations face the challenge of regaining their trust. Let's investigate the motivations behind shrinkflation and what challenges lie ahead for the companies in the crosshairs.

The skinny on shrinking products

There are many reasons certain companies are resorting to shrinkflation, some of which may be more obvious than others.

Daniel Muirhead, executive director of strategy at Omnicom Media Group, the world’s second-largest agency holding company, argues that economic pressures stemming at the manufacturing level engender inflation. “Corporations typically get squeezed financially before consumers do. This is one of the core reasons for shrinkflation,” he says. “Now, some corporations can simply absorb the increased costs and not pass them on to consumers, but this only works temporarily until there is relief in the market. There are real cost challenges right now across shipping, manufacturing, et cetera. So, brands are making these moves to help keep the business solvent while not passing on price increases to the consumer.”

In essence, consumers are paying more for less in order for corporations to maintain shareholder value. Georgia O’Brien-Perry, digital PR manager of Bulldog Digital Media, warns that this tactic can backfire, adding: “Shrinkflation can feel more insidious than standard inflation, because it’s deliberately designed to be less noticeable and prey on those who have brand loyalty and won’t analyze the packaging every time they shop.”

Greg Zakowicz, senior commerce expert at marketing messaging service Omnisend, argues that inflation is often cited as the reason for shrinkflation, but in reality, it is an excuse for companies to arbitrarily raise prices on goods and services. “Shrinkflation is an executive-made decision to exploit families and defend it with the built-in, yet phony, excuse of inflation,” he says. “When consumers are financially squeezed by companies at the same time they report record profits, it is proof of nothing more than pure greed.”

Long-term brand safety risks

While companies may see this practice as a necessary evil to maintain profitability, the long-term consequences of eroding consumer trust could outweigh the short-term gains.

Dr. Tenpao Lee, professor emeritus of economics at Niagara University, says shrinkflation puts companies at risk of losing loyal customers once they “realize they were cheated,” adding that “smart and rational consumers may also find out easily by comparing their unit price, especially when [they] are used to enjoying large quantity discounts at wholesale prices.”

He goes so far as to say that shrinkflation may not even be effective in saving the company money. “The change of production processes for new sizes and labels may generate extra costs with minimal savings,” he explains. “Therefore, reputable suppliers should be careful in adopting this strategy.”

Omnicom’s Muirhead presents an unexpected turnout: with consumer loyalty on the line, competitor brands not engaging in shrinkflation could seize market share.

“Brands who are not deploying shrinkflation tactics have an opportunity here to come out and declare that they ‘aren’t like the other guys,’” he says. “And, it could really work in their favor. When consumers feel betrayed by brands they tended to be more loyal to, they begin to consider alternatives. This makes it a ripe time for challenger brands to come in and stake out a claim that is compelling to consumers.”

Navigating the storm without shrinking trust

The question lingers: for companies facing shrinkflation allegations, what’s the next step in rebuilding consumer trust?

Zakowicz identifies various ways corporations can mitigate these challenges: “Increase worker wages. Sacrifice some of their record profits and lower the cost of goods, even if the packaging remains smaller than previous. Move back to standard packaging at a standard price. Options are available, but brands surely won’t take them.”

O’Brien-Perry echoes some of Zakowicz’s points, emphasizing the importance of adjusting pricing strategies to alleviate pressure on consumers’ wallets, while providing more solutions.

As she puts it, “Companies can look at developing more flexible product ranges that cater to varying budgets, including economy options without compromising on quality ... Putting more of an emphasis on helping consumers ... is another way corporations can help. Think of community-driven schemes such as food drives, donating money to local charities, or setting up funds or giveaways to help provide consumers with items outside of what the corporation usually offers... Even if not related to their product, a brand providing extra resources can ingratiate themselves to consumers and show that they aren’t just about profit, but people - something that is more and more important in recent years.”

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