'Shrinking in size, but not in price' - Everything you need to know about 'shrinkflation'

“A bag of chips has fewer chips, but they’re still charging us just as much.”

That's the President of the United States slamming companies for engaging in "shrinkflation", widely reported earlier this year. And President Biden's ire is not limited to crunchy snacks.

“As an ice cream lover, what makes me most angry is that ice cream cartons have actually shrunk in size, but not in price,” he continued.

Consumer products getting smaller in size but not changing price is a practice that’s become known as “shrinkflation” and is closely related to “skimpflation”, a practice that sees companies reduce the quality of their product or service while keeping the price the same.

Examples of skimpflation include consumer brands reducing the amount of chicken in their chicken enchilada products or reducing the pork content in sausages and choosing cheaper ingredients instead.

Major producers and brands around the world have adopted this strategy. And while it might be good for the business bottom line, it can result in customer dissatisfaction and erode trust. Both are forms of hidden inflation at a time when actual inflation has been high by historical standards.

One of the reasons the rate of inflation matters so much is because it plays directly into the cost-of-living crisis, where consumers around the world have felt prices rising more quickly than usual.

In the US, Senator Bob Casey has introduced a bill to fight the shrinkflation of consumer goods that American families routinely purchase. His analysis shows how widespread shrinkflation is, and the bill would direct the Federal Trade Commission (FTC) to establish it as an unfair or deceptive practice. It would also authorize civil action against corporations that practise shrinkflation.

Meanwhile in France, retailers will soon have to flag to shoppers if a product has been reduced in size without a corresponding cut in price, the country’s finance ministry announced in April.

The move comes after food inflation hit a record high of 16% last year, sparking political action in France, Reuters reported.

There are signs that inflation has peaked and, according to Kristalina Georgieva, Managing Director of the International Monetary Fund (IMF), and the positive trend looks set to continue in 2024.

“The inflation rate is going down, on average,” she told the World Economic Forum in an interview during the Annual Meeting in Davos, Switzerland in January.

This is also reflected in the World Economic Forum’s Chief Economists Outlook for January 2024. The survey results show an improvement in the inflation outlook for 2024, with expectations for high inflation being pared back across all regions.

“The improvement in expectations is particularly marked for Europe and the US,” the report says. “With the share of respondents expecting high or very high inflation declining.”

And while research from the US Bureau of Labor Statistics shows that shrinkflation has little impact on overall inflation rates, what’s clear is that political leaders and policymakers remain focused on the issue.