I’ve heard a lot of buzz about gasoline prices recently. Mostly, it’s grumbling that the cost to fill the tank is going up.
But, friends, it could be worse: Oil companies could be shrinking the gallon.
OK, that’s not happening with gas. But it is happening with many of the consumer products you buy at the grocery store. It’s been dubbed “shrinkflation.”
As prices for their supplies increase, product manufactures have three choices. They can eat the increased costs and take the hit to their bottom line. They can raise the prices that they charge consumers for their product. Or, creatively, they can sell less of their items per package while charging the same price. And the latter is proving to be an appealing option for many companies.
In this article, I want to examine what’s happening with shrinkflation. How effective is it? How often does it happen? Which products have recently shrunk in size? And how can you learn about others that come down the pipeline without memorizing the current package weight of everything you buy?
Let’s dig in.
Picking a package of pepper
One of the most notorious example of shrinkflation in recent years came from McCormick & Co., the market leader in spices.
You see, in 2014, there was a spike in wholesale black pepper prices due to a poor harvest and a global jump in demand for pepper. During the year, those wholesale prices shot up 30%. Most companies chose to raise their prices to deal with the increase in their costs.
Not McCormick.
The company instead reduced the amount of pepper it sold to consumers by 25% across the board. The large tin, which initially included 8 ounces of pepper, now had 6 ounces. The medium 4-ounce tin now had 3 ounces, and the small tin slipped from 2 ounces to 1.5 ounces. For two years, McCormick did this without changing the size of the container, meaning that the product looked the same, it just weighed less.
Image from Watkins Inc.'s suit against McCormick and Co., showing how a medium pepper tin (left) compared to McCormick's old tin (middle) and new tin (right).
The practice of not filling a product’s container completely is called “slack filling,” and it’s actually illegal in the U.S., ever since 1938′s Food, Drug and Cosmetic Act. McCormick was sued by its competitors, eventually settling out of court to give any California, Florida and Missouri residents who bought its products the opportunity to claim $4 per pepper package purchased. Say that five times fast. (Since 2017, McCormick has sold smaller containers that fit the amount of pepper they include.)
Still, consumer researchers were curious: How many people noticed the reduced pepper quantity? Researcher Ian Meeker looked into the problem, with his appropriately named paper “Does Peter Piper Pick a Package of Pepper Inattentively? The Consumer Response to Product Size Changes.” He compared McCormick’s sales data to its competitors to see how sales were affected by the decision to shrink the amount of pepper sold per package.
Sales did not decline when McCormick sold people less pepper for the same amount of money. In fact ... sales rose.
Why? Well, think about it. McCormick’s competitors upped their prices to deal with the economics, while McCormick didn’t. All of a sudden, McCormick’s pepper was the cheapest tin on the shelf. Worse, when McCormick downsized its product, it increased the price more on a per-ounce basis than those companies that transparently hiked their prices.
The blue line is the pepper price per ounce of products, like McCormick's, that chose to downsize. The red line is the price per ounce of those who stayed firm in their original packaging.
Sure, the company was selling a smaller product than before, but most shoppers didn’t notice. Interestingly, that was true even if they bought a downsized transparent grinder full of pepper, not just the opaque tins. It appears consumers aren’t just ignoring the weight calculation printed; they’re also not looking at the amount of product within the packaging.
Meeker estimated that buyers were bamboozled out of about 10 cents per pepper package purchased solely as a result of their inattention to the changing size.
Shrinkage is a widespread problem
Of course, you’re probably not going to the grocery store just for pepper — shrinking products are pretty common. By no means is this a complete list, but here are some recently minimized items to watch for:
So how widespread is package shrinking? We don’t have a U.S. database, but there is one in the United Kingdom. According to its Office for National Statistics, 2,529 products on supermarket shelves decreased in size or weight between 2012 and 2017. There’s reason to believe that, in 2022, inflationary pressures would cause shrinkflation to become even more common.
Keeping up to date with shrinking products can be difficult, but consumer advocate Edgar Dworsky’s website Mouseprint.org regularly posts lists of shrinking products. Members of the Reddit community r/shrinkflation also post examples they find.
The counterexample
If I started this story by shaming one of the worst examples of shrinkflation, I want to end it by congratulating one of the best examples of opposing inflation: AriZona iced teas. Somehow, the makers of the popular beverage have kept the price of their 23-ounce can of tea at 99 cents for 30 years, even though one 1992 dollar is worth approximately two 2022 dollars.
The Los Angeles Times asked how they pulled it off.
“I’m committed to that 99 cent price — when things go against you, you tighten your belt,” CEO Don Vultaggio told the Times. “I don’t want to do what the bread guys and the gas guys and everybody else are doing. Consumers don’t need another price increase from a guy like me.”
AriZona even noticed that some of its distributors were raising prices on the product beyond the suggested 99 cents, so it began printing the price on the cans.
AriZona is a family-run business. The owners are Vultaggio and his two sons. Combined, they are worth $4 billion, all from AriZona revenue.
“Your company has to deal with cost increases, but your customers have to deal with cost increases, too,” Vultaggio said. “And if you break their back, nobody wins.”
Obviously, not every business can be AriZona. The owners have had to consolidate production in their own factories, negotiate with aluminum wholesalers, and take various other steps to keep that 99 cent price at the same volume. But they’ve worked at it, and good on them for doing so.
So, yes, more companies are going the shrinkflation route, but not everyone. And that makes it more valuable for attentive shoppers to keep themselves informed..
In other words, please, while picking a package of pepper, purposely peek at the printed poundage of product prior to purchasing.
Andy Larsen is a data columnist for The Salt Lake Tribune. You can reach him at alarsen@sltrib.com.
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