Vol. 81/No. 1      January 2, 2017

 

‘Shrinkflation’: Bosses hide inflation in smaller packages

 
In grocery stores across the country workers are finding that things are going down — but it isn’t prices. What the business reporters call “shrinkflation” describes how profit-hungry bosses from Coca-Cola to Chobani are cutting the size of their products while prices stay the same. From candy to cereal, ice cream to tea bags, shrinkage is on.

Companies put smaller size items on the shelves, with new packaging and perhaps a tweak to the recipe. Some industries have gone through multiple bouts of shrinkflation.

A little over a decade ago, Yoplait and Dannon led in slashing yogurt cup size by 25 percent, from 8 to 6 ounces. After a little hit in sales, they rebounded even higher. “Dannon is now pocketing a larger profit on every cup of yogurt it sells,” the New York Times marveled.

Dannon also boosted profit by charging more for their Activia brand, claiming its cultures speed up “intestinal transit” and promote regularity. Unfortunately for them, it wasn’t true and they had to fork over $21 million in a settlement with the Federal Trade Commission for false advertising.

Recently, yogurt bosses have gone for a second bite at the apple, cutting product from 6 to 5.3 ounces. Chobani said they did it to match the shrinkage in Yoplait’s Greek yogurt, as a service to their fans, so they could accurately compare the “nutritionals.” Of course, both yogurts sell at their same old prices.

Other schemes involve companies promoting multipack bags of candy and snacks that appear the same or larger but include less food inside. Raisin boxes look the same from the front, but got skinnier.

Some company officials argue that shrinkflation is a public-spirited health measure — not so much for their profit margins but to help you keep from getting fatter! One spokesperson for Mars candies told CNBC News that they reduced the size of their Mars and Snickers bars “to bring down their calorie content.”

Particularly irksome to candy lovers was the appearance last month of new Toblerone bars, famous for their pyramids of milk chocolate. They’re now 10 percent smaller with more calorie-free space interspersed between fewer pyramids.

“Britain Panics as Mondelez Cuts the Size of Toblerone,” headlined a Nov. 8 Fortune article. While the new shape chopped the chocolate you get, you’ll be relieved to know you’re still getting the same size packaging.

Hershey shrank the weight of its Reese’s Peanut Butter Cups while selling them at the same price. Six-packs of Cadbury’s Creme Eggs have become five-packs.

Shrinkflation “may foreshadow an overall jump in prices,” Bloomberg News notes. Once you’ve grudgingly adjusted to the smaller size, the price creeps up. Oh well, it’s better for you — unless you end up eating two where you used to get by on one.

The government’s method of compiling consumer price index figures minimizes the real impact that rising prices have on workers’ weekly expenses. During the Clinton administration, the government changed the way they calculated the consumer price index and instantaneously “lowered” inflation. When steak prices go up, for example, government statisticians assume people will buy hamburger instead. So the lower cost of hamburger meat replaces the price of steak in the CPI, keeping official inflation figures down.  
 
 
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