New Groundwork Report Exposes Shrinkflation’s Role in Rising Prices

New Groundwork Report Exposes Shrinkflation’s Role in Rising Prices

Shrinkflation responsible for as much as 10% of inflation in key product categories; Biden expected to address shrinkflation at SOTU

Today, Groundwork Collaborative released a new report, “Big Profits in Small Packages,” that dives into the strategies corporations are using to boost profits, specifically, making their product sizes smaller while maintaining the same – or higher – prices. The report makes clear that “shrinkflation,” also known as “price pack architecture,” is playing a crucial role in growing profit margins while shortchanging consumers, with executives citing outrageous gimmicks like portion control and reducing emissions as excuses for ripping off consumers.

President Biden is expected to address shrinkflation in his State of the Union speech on Thursday, March 7. On Tuesday, President Biden announced a new “strike force” to address illegal and unfair pricing.

“​​During this period of high inflation, where rising prices are putting a squeeze on household budgets, shrinkflation just adds insult to injury,” writes Lindsay Owens, executive director of Groundwork Collaborative and author of the report.

The report notes steps the Biden Administration has already taken to rein in deceptive pricing practices and also offers policy recommendations to further crack down on unfair profiteering, such as empowering the FTC with the Shrinkflation Prevention Act introduced by Sen. Bob Casey (D-PA). The report also recommends strengthening the corporate tax code to disincentivize egregious profiteering.

Among the report’s key findings:

• Shrinkflation accounts for about 10% of price increases in household essentials like paper towels, toilet paper, and snacks during the inflation crisis.
• The snack company Utz has said on earnings calls that shrinkflation is “the path to higher margins” and that it accounted for about 20% of its net price hikes. The company trimmed the size of its pretzel jars from 28 ounces to 26 ounces, while its bags of chips shrank from 9.5 to 9 ounces.
• PepsiCo, which has had its products removed from shelves in France due to its pricing strategies, told reporters when questioned about shrinkflation, “we took just a little bit out of the bag so we can give you the same price, and you can keep enjoying your chips.”
• The shrinking size of Hershey’s Kisses bags and Reese’s peanut butter cups has been well-documented. Hershey’s executives on earnings calls have discussed moving beyond list price hikes toward shrinkflation and that it’s “changing the game,” and “a key lever in our pricing strategies.”
• Kimberly-Clark, one of two major diaper companies and a manufacturer of an array of household essentials, has pursued price hikes knowing that consumers don’t really have any other choice. Their CEO said, “If the price goes up on bath tissue, [it] generally doesn’t mean you’re going to use the bathroom less, right?” The company has been found shrinking the rolls in its Cottonelle toilet paper packs, cutting the number of tissues in its Kleenex boxes, and thinning out its Scott toilet paper rolls.
• To curb shrinkflation, the Federal Trade Commission could explore its authority under the Fair Packaging and Labeling Act to prevent unfair and deceptive practices like shrinkflation.
• Thanks to the Tax Cuts and Jobs Act, the companies practicing shrinkflation paid shockingly low effective tax rates while raking in sizeable profits from 2018 to 2022. Policymakers should pursue tax policies that disincentivize profit-taking practices that cheat consumers and squeeze family budgets.

The report comes as policymakers scrutinize shrinkflation and corporate pricing strategies. President Biden released an ad before the Super Bowl condemning corporations that have shrunk the size of their products and new legislation from Sen. Casey specifically targets shrinkflation.

Read the full report here and email press@groundworkcollaborative.org to speak with Lindsay Owens about the report’s findings.