"Honey, I shrunk the Gatorade Bottles!"...Shrinkflation: what it is, and why it happens

While “inflation” has appeared to become 2022’s word of the year, you probably haven’t heard much about its quieter, but still pertinent cousin, “shrinkflation.”

The background:

While inflation increases the price of goods, in shrinkflation, the price stays stable and the quantity of goods decreases. For example, a small box of Kleenex now contains 60 tissues when it used to have 65. Chobani Yogurts now contain 4.5 ounces instead of 5.3. Folgers coffee boxes now contain 43.5 ounces of coffee beans when it used to hold 51. Gatorade bottles used to be 32 ounces and now are 28. The list goes on, pervading every aisle of the grocery store and every shopper’s purchase list.

Why it matters:

Shrinkflation is typically used in lieu of price inflation when it comes to price sensitive customers and price sensitive items. There is a natural limit to how much someone is willing to pay for household items, like Kleenex, before they just start blowing their nose in toilet paper. Thus, it is more important for Kleenex to maintain a price that remains acceptable in the eyes of their customer and find other opportunities to cut cost corners. Similarly, in January, Domino’s Pizza shifted its ten-piece chicken wings to now contain eight pieces, all for the same price of $7.99. Because Domino’s is considered a fast-food joint, and thus a cheaper dinner alternative, it was more important that Domino’s protect its low prices than keep its ten-piece package. If Domino’s raises the price of chicken too much, the customer will likely choose to invest a few more dollars in the higher quality stuff. Sometimes, companies apply shrinkflation practices in lieu of price hikes only in areas with more price sensitive customers (i.e., areas with higher concentrations of low income people.)

You’ve probably never noticed shrinkflation, which is exactly the value in it. Companies often distract the customer from size decreases using colorful branding and creative explanations for why the smaller package is, somehow, better. Gatorade, for example, argues that this new, smaller bottle is easier to hold. Folgers argues that their coffee beans have become lighter with new technology. And even if you did notice that your Chobani yogurt package has decreased marginally, it isn’t as likely to influence your purchasing decisions as price changes do. Psychologically, losing five Kleenex doesn’t feel as bad as paying more.

Upsizing, the concept of reversing shrinkflation, hardly occurs. Once a customer gets used to the new size, adding those five Kleenex back in hardly matters to the purchaser but hurts the company. So stock up on those larger Gatorade bottles while you can because they may not be coming back.

Song of the week: "Phenomenon" by Mt Joy