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

This article has been updated.

As global inflation has driven up costs, companies around the world have turned to 'shrinkflation' as a means of protecting their margins. In Japan, for example, where decades of deflation make direct price hikes challenging, this practice has become widespread, especially in fast-moving consumer goods (FMCG).

So much so, that one Japanese consumer was driven to create a website documenting hundreds of examples of product downsizing, from snacks to household items, Reuters reported. His frustration began with shrinking chocolate biscuits, reflecting broader consumer sentiment.

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. It primarily affects FMCGs, particularly in the food and beverage sector.

This trend challenges the law of one price (LOOP) as net weights decrease subtly, often escaping immediate consumer notice. It manifests in various ways, including gradual size reductions and packaging redesigns. Consumer awareness varies by region, with the highest levels reported in Great Britain (82%), Canada (80%), and Australia (79%).

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.

Shrinkflation occurs when companies reduce the size of a product in response to rising production costs – such as labour costs, raw materials, and energy commodities – or intense market competition. Instead of raising prices, businesses opt for product downsizing or package redesign to protect profit margins and manage operating margins.

While these changes are often minimal, they can complicate inflation measures and risk public scrutiny if customers notice they are getting less for the same price. As rising costs continue, shrinkflation allows companies to stealthily adjust without triggering backlash from government scrutiny or consumer dissatisfaction.

In Korea, food makers and suppliers face fines of up to $7,300 if they fail to notify consumers of product size changes. Meanwhile, 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 to establish it as an unfair or deceptive practice. It would also authorize civil action against corporations that practice shrinkflation.

And, in France, retailers will now 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.

There are signs that inflation has peaked and, according to Kristalina Georgieva, Managing Director of the International Monetary Fund, and the positive trend looks set to continue in 2025.

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

"Inflation expectations continue to converge towards a broadly moderate outlook across most regions, the report says. "This is driven, in part, by optimism about the condition of global supply chains.”

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.