BLOG | Shrinkflation: The Phenomenon of Shrinking Product Sizes

Shrinkflation, a practice wherein the size or quantity of a product is reduced while maintaining or increasing its price, is a subtle form of inflation that can yield serious consequences for consumers, companies, and the economy as a whole.

Particularly prevalent in the food and drinks sectors, shrinkflation is favoured due to its ease of implementation, allowing changes to product size or content without customers noticing. However, it can also be found in other sectors, such as the clothing industry.

Consumers may not realise the effects of inflation if prices do not rise at the same rate as costs. This allows businesses to continue selling the product in a competitive market rather than having to discontinue it due to its high cost.

The Causes of Shrinkflation

Shrinkflation is primarily driven by rising production costs. When a product’s raw material expenses increase, companies often respond by either passing the higher costs onto customers through price increases or by reducing the product’s size while keeping the same price. Production costs involve various aspects, including the commodities used in manufacturing, fuel to operate machinery, electricity to power the factory, and labour force.

In addition to production cost regards, companies may use shrinkflation as a strategy to maintain market share. In highly competitive industries, raising prices may prompt customers to switch to alternative brands. However, a subtle adjustment, such as a small reduction in the size of their products, enables companies to enhance profitability while keeping their prices competitive.

Companies’ Transparency Toward Consumers

Ensuring transparent communication with consumers is crucial for companies contemplating a reduction in product size. In this context, many countries around the world including Brazil, Hungary, South Korea, and France implemented regulations to inform consumers about shrinkflation instances by mandating labels on products that have been reduced in size while maintaining the same price, these regulations can enhance transparency and protect consumers from deceptive practices related to shrinkflation.

In Europe, France has taken the initiative to address this issue, when the French Ministry of the Economy sent a draft decree to the EU in January 2024, requiring supermarkets to inform their customers about cases of shrinkflation by March. This initiative began in September 2022, when the consumer defence association “Foodwatch” was the first to alert consumers to shrinkflation citing the popular “Kiri cheese square” as a product that had shrunk from 20g to 18g.

In light of the global effort to address shrinkflation, protect consumers, and raise awareness, Tunisia should adopt specific programs to strengthen consumer protection mechanisms within its market through:

• Regulatory Framework: Create and implement an efficient regulatory framework requiring clear labelling for shrinkflation-affected products. Regulations should ensure that consumers are informed of any changes in product size while keeping the same price.
• Consumer Awareness Programs: Launch targeted consumer education campaigns to inform the public about shrinkage and how to recognize it. This may include working with consumer groups, media, and digital platforms.
• Market Monitoring: Establish a system to monitor the market regularly to identify potential shrinking cases.

By implementing these measures, Tunisia can ensure fair practices in the market, protect the interests of consumers, and promote open communication between businesses and consumers.