Alice Pugh discusses Shrinkflation and Skimpflation and how these have had an adverse effect on the consumers. This blog was originally published in the Birmingham Business School Blog.
What is Shrinkflation?
Shrinkflation is when the size of a product decreases, but the price remains constant. It is a discrete way of increasing the price of a product, without visibly increasing the price of a product that you see on the shelf. Most consumers often don’t realise they have gotten less for the same price until they have begun using the product.
Additionally, reductions in size are usually incremental over a prolonged period (years), generally meaning consumers do not notice at first.
A strong example of shrinkflation historically has been the reduction in the size of sharing boxes of chocolate such as Quality Street, Celebrations and Roses. In recent months, there have been several reports on products which have been subject to shrinkflation.
Which? investigated products which have fallen foul of shrinkflation these include:
- Lurpak, 20% smaller, down from 250g to 200g
- Penguin and Club biscuit multipacks, 12.5% smaller, down from eight bars to seven
- McVite’s Digestives, 10% smaller, down from 400g to 360g
- Magnum ice creams (4 pack), 9.1% smaller, 100ml down from 110ml
- Quality Street, smaller (again) 7.7%, down 50g from 650g to 600g
- Pringles, 7.5% smaller, down to 185g from 200g
Barclays found that in June 2023, 70% of Brits noticed examples of shrinkflation in the products they bought, particularly in goods such as chocolate (46%), crisps (42%), packs of biscuits (37%), and snack bars (32%).
What is Skimpflation?
Whilst shrinkflation largely affects goods, there is another form of inflation that largely impacts services, and this is called ‘skimpflation’. Skimpflation is when businesses cut back on the quality or availability of a service or product whilst keeping prices steady. As input prices, which go into producing a product, increase businesses’ skimp by spending less on services and materials to maintain profit, the cuts are passed down to the customer, even as prices remain stable.
Examples of skimpflation might be a reduction in labour serving at a fast-food restaurant, leading to a reduction in the quality of service, whilst maintaining the price. It could be reductions in the content of coco in the production of products containing chocolate, in place of cheaper sweeteners. Another example might be delivery times for products ordered online increasing, so you pay the same price, but the quality of service is reduced, as the product takes longer to reach you.
The Guardian found a number of products which have been subject to skrinkflation this year, these include:
- Morrisons Guacamole, 3% reduction in avocado quantity in the product
- Aldi Pesto Rosso, 6% reduction in virgin olive oil quantity and 4% reduction in sun-dried tomato quantity
- Aldi Bramwels Mayonnaise listed 9% egg yolk in the ingredients but now it lists 6% egg and 1.5% yolk
- Bertolli olive oil spread contained 21% olive oil now contains 10%
Whilst all these products are still the same size, the quality of ‘expensive’ ingredients has reduced, the result has been a reduction in the quality of the product, whilst maintaining the price of the previous higher quality product.
A downgrade in quality
Barclays found that 52% of Brits had noticed that some of the food and drink products that they buy had been downgraded in terms of the quality of premium ingredients in products, whilst the price remained constant.
Crisps (44%), sweets and chocolate (43%) and cakes and biscuits (36%) were the most frequently reported. Consumers noticed a reduction in the quality of takeaways (22%) and restaurant meals (20%), whilst the price remained constant. Consumers stated that the quality of clothing also declined (44%), toilet rolls (43%) and toiletries/cosmetics (37%). 41% had also noted a decline in the quality-of-service products as well.
All above board
However, neither shrink or skimpflation is illegal. In terms of regulation, as long as a product accurately states the quantity then shrinkflation is fine. In relation to skimpflation, it is reliant on the quantitative ingredient declaration (QUID) regulation, this means that if you have peanut butter, for example, then the main ingredient in terms of quantity has to be peanuts. Therefore, so long as businesses abide by these regulations then it is perfectly legal for them to change the size or ingredients.
This impact of shrinkage and skimpflation is not just short-term. Whilst many businesses have been forced to do this as a result of higher input prices over the past year, it is likely many of these changes will be kept to increase profit margins. Changes in products will most likely result in a permanent hit to households’ wallets.
Consumer reaction and brand reputation
Due to the cost-of-living crisis and our money not stretching as far as it used to, consumers are more reactive to these tactics. In response to Shrink and skimpflation, Barclays found 29% of consumers chose to buy their favourite products less often and almost a fifth (18%) chose to switch to an alternative brand which had not reduced the size of their product.
Many shoppers are also taking to social media, posting product and service changes online, calling out businesses using these tactics during a cost-of-living crisis.
Brands, particularly premium brands, will have to be careful with these tactics as brand loyalty becomes more unreliable during a cost-of-living crisis. Consumers are quickly switching to cheaper alternatives, particularly if they feel they have been tricked or cheated.
Premium brands may also struggle with recipe changes, as they are usually premium because of their quality. However, nonpremium brands have more leverage on their ability to use these tactics as they are lower cost to begin with.
Ultimately, though consumers are more unreliable during periods of high inflation, as their focus switches towards the best value, they become savvier and are more likely to shop about to find better value for money. Many businesses are playing a dangerous game, and at least in the short-term consumers will react if they feel they are being taken advantage of when times are tough.
Over time consumers will begrudgingly return to their old favourite products, as the cost-of-living crisis eases, and in the long run, businesses will ultimately make more money.
The views expressed in this analysis post are those of the authors and not necessarily those of City-REDI, WMREDI or the University of Birmingham.