As cost of living crisis deepens, Democratic lawmakers go after ‘shrinkflation’
Democratic lawmakers Elizabeth Warren and Madeleine Dean are taking aim at mega corporations for price gouging their customers in a roundabout way through “shrinkflation.”
In a nine-page letter to the CEOs of Coca-Cola, General Mills, and PepsiCo, Warren and Dean accused the companies of sneakily shrinking package sizes to “squeeze more profit out of customers already facing challenging economic circumstances.”
“Coca-Cola has been engaging in shrinkflation for years, promoting what it calls “package innovation” in order to boost its bottom line,” the lawmakers wrote.
Warren and Dean requested that Coca-Cola provide the average price per ounce of its soda products for each year starting in 2018.
Shrinkflation—reducing a product’s size or quantity while maintaining its price—has been going on for years. And it’s not just a Coke problem.
The World Economic Forum (WEF) even raised the issue, finding that household paper products, snacks, sweets, diapers, and pies were most likely to suffer from shrinkflation.
“Major producers and brands around the world have adopted this strategy,” WEF’s Emma Charlton wrote.
While these companies have been successful in shrinking their products, this strategy “can result in customer dissatisfaction and erode trust,” Charlton said.
After years of rising prices, Americans are finally starting to recognize the impact of shrinkflation.
Shrinkflation takes center stage
Anger over shrinkflation reached a boiling point during the 2024 Super Bowl when President Biden called on companies to stop reducing product sizes.
Shortly thereafter, YouGov commissioned a study on shrinkflation and found that 82% of consumers were worried about shrinking product sizes. A total of 43% said they were “very concerned” about the problem.
Although shrinkflation may seem like a symptom of corporate greed, there are many reasons why companies are taking this approach.
Faced with rising material and labor costs, companies can either raise prices or shrink their products to maintain their profit margins.
For many companies, shrinking the packaging is more palatable than raising prices for inflation-weary consumers.
According to a McKinsey study, consumer brands have been the most vulnerable to rising costs because of slowing population growth and greater competition from online retailers.
As Creditnews recently reported, online groceries were the only segment of the food industry to see falling prices this summer.
The public’s negative perception of shrinkflation comes as more consumer brands defend their tactics against claims of price gouging.
According to Target CEO Brian Cornell, increasing prices beyond a reasonable level isn’t a strategy most corporations can seriously consider.
“We’re in a penny business,” Cornell said, noting the tiny profit margins in the retail and supermarket sectors.
His comments are backed up by industry statistics. According to Forrester, the average profit margin of U.S. retailers has hovered between 2.8% and 3.5% for the past two decades.
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