Opinion: Inflation, Shrinkflation, Swapflation, Stagflation
According to the owner’s manual, the car that I drive requires the highest-octane gasoline. I could cheat and press the middle button on the gas pump, but I don’t. So, my last fill cost $6.99 per gallon. That is inflation. Really, really big inflation.
Inflation occurs when consumer prices increase. In and of itself, there’s nothing wrong with inflation. It’s been a constant over the years, and by and large it’s usually not a problem. That is, of course, so long as household income increases at the same rate.
Shrinkflation is not a new occurrence, but the extent of it is. And the effect on food prices seems to hurt the most. It happens because of three factors. First, because of natural disasters: fires and droughts in the U.S., flooding in Europe, frost in Brazil, and so forth. Second, higher fuel prices and supply-chain backlogs. Third, shortage of workers and the resultant increased cost of labor.
When the cost of processing and supplying food increases, food companies have four choices. First, they can do nothing and absorb the loss of profit. But that’s not going to happen. Ever. Second, they can employ the tactic of “swapflation;” that is, reformulate the product with cheaper ingredients. Third, they can raise prices. However, that’s readily observable to consumers. And fourth, they can reduce the size or amount of the product without changing the price. The last option is shrinkflation, and it is far less observable by consumers.
“Swapflation” occurs when a company replaces an ingredient with a less expensive alternative. For example, the price of Arabica beans has increased by about 50 percent during the past year. Some coffee companies are now using Robusta beans instead. They are lower in quality and much less expensive. But the price of the product to the consumer has not changed.
Edgar Dworsky, former assistant attorney general of Massachusetts, says that shrinkflation appeals more to manufacturers because they know customers will notice price increases but won’t keep track of net weights or small details, like the number of sheets on a roll of toilet paper. For example, Cottonelle Ultra Clean Care toilet paper has shrunk from 340 sheets per roll to 312; Bags of Fritos Scoops marked “Party Size” used to be 18 ounces, but now they’re 15.5 ounces; and Folgers coffee has downsized its 51-ounce container to 43.5 ounces but still says it will make up to 400 cups. Folgers claims that the company is using “lighter beans.”
Prices are shrinkproof
In this era of shrinkflation, consumers are paying the same prices at the cash register, but they’re getting less for their money. PepsiCo admits that it’s shrinking Gatorade bottles. Its once 32-ounce bottles now hold only 28 ounces. The company says that the bottles are now tapered in the middle in order to make them easier to hold. However, it didn’t respond to a question as to why the product is now more expensive.
Tropicana is America’s favorite orange juice, but its new jugs are 59 ounces, 7 ounces less than they used to be. Pantene ProV Curl Perfection condition has been downsized from 12 fluid ounces to 10.4 fluid ounces, but it still retails for $3.99. A box of Earth’s Best Organic Sunny Day Snack Bars used to contain 8 bars; now purchasers get 7. The price is still $3.69.
Breakfast cereal producers had a simple response to the market. Cereal boxes look exactly the same as they used to, but they contain less product. How is that possible? Well, the boxes are just as tall and wide as ever, but they are less deep, or “thinner.” Sneaky, effective, and the same price!
Bounty reduced its 2-ply sheet roll from 165 to 147 sections. Dryer’s and Bryers ice cream, which used to come in half-gallon cartons now is packaged in a 48-ounce size. Colgate took its largest size toothpaste (8.2 oz.) and reduced it to 8 ounces. Not a significant change to consumers. But the company had the audacity to print “33% more” on the front of the 8-ounce box!
Corporate profit and the future
In many cases, corporate profit has not suffered from the “perfect storm” of shipping delays, supply-chain disruptions, and changes in demand due to the pandemic. Hitendra Chaturvedi, professor of supply-chain management at Arizona State University’s W.P. Carey School of Business, stated that — in some cases — companies’ profits (that is, sales minus the cost of doing business) are increasing exponentially. For example, PepsiCo’s operating profit grew by 11 percent in 2021 and a whopping 128 percent during the first quarter of 2022.
However, the trend can reverse. As inflation eases, competition might force manufacturers to lower prices or reintroduce larger packages. However, upsizing is rare. And, unless household income increases to match the rate of inflation, we’re due for another round of stagflation, a stagnant economy with ever-inflating prices.
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Jim Glynn, Professor Emeritus of Sociology, may be contacted at email@example.com.