Your two litres of ice cream is now (in fact) 1.8 litres

HAS it ever happened to you? For years, you've been buying a well-known brand of cheddar cheese, a neat, elongated block, vacuum-sealed: 1 kg. It makes sense that it should be 1 kg. It's a logical and convenient size.

The last one you bought cost about R110. But then, one day, your eye catches the label in the fridge and you see it's 900g. Same shape, same packaging, just smaller, but not enough for you to notice with the naked eye. Funny, you thought you were buying 1 kg — the price was the same as before, R110.

You forget about it until some months later when you notice you are now buying 850g instead of 1 kg. But the price remains the same, which means the price per kilogram has sharply increased.

You start noticing this with other products too. A two-litre tub of ice cream is suddenly 1.8 litres. At the same price. The packet of chips in your hand feels lighter, perhaps only half full. You are probably right. The paper towel roll in your kitchen feels thinner, toilet rolls feel smaller. 

A year or so ago, I realised it's not me hallucinating. It's a phenomenon, a recognised strategy. It even has a name: shrinkflation, coined by British-born American economist Pippa Malmgren. Long before economists and consumers noticed it, it already had euphemistic corporate names which confirm how calculated a strategy it is. “Price pack architecture", “weight out" and “package downsizing". 

It has become so common that US President Joe Biden even mentioned it in this year's State of the Union address: “It is called shrinkflation. You get charged the same amount and you got about, I don't know, 10% fewer Snickers in it. A bag of chips has fewer chips, but they are still charging us just as much. As an ice cream lover, what makes me most angry is that ice cream cartons have actually shrunk in size but not in price.”

It’s inflation, stupid

Economists say shrinkflation is a symptom of high inflation, of rising costs and labour prices, of tough economic times. It is only regular inflation, but in a time when prices have been steadily rising for a long time and consumers' disposable incomes are under intense pressure, manufacturers and supermarkets seek a way to mitigate the impact by disguising inflation.

The period after Covid was a perfect storm for an underhanded price strategy like shrinkflation to flourish, and it did. It is especially a threat to South Africans because the World Economic Forum predicts Sub-Saharan Africa will have the highest inflation in the world in the coming year.

Indeed, the cheese is becoming more expensive, but most consumers don't realise it. The initial impulse from processors and manufacturers is not to let their price increases fall behind inflation, but in many cases where traders find the technique works, greed steps in and profits are driven in a rapacious manner. This is the moment when the block of cheese becomes smaller for the second time and the price becomes higher than you paid for the original full-size product.

At this point, the producer is no longer trying to cope with inflation, it is driving inflation. Pennsylvania Senator Bob Casey (D) made shrinkflation and the greed of some American household companies his business. It is probably because of Casey's Greedflation campaigns and reports that Biden touched on the subject.

In one of his reports, based on government data, he said that between June 2020 and June 2022, prices rose by 14% in America but corporate profits rose by 78%. The Federal Reserve found that corporate profits were responsible for all inflation between June 2020 and June 2021, and 41% of all inflation between June 2021 and June 2022.

Casey does not argue that shrinkflation is responsible for all or even most of consumer inflation, but it is part of a larger explanation for how companies manufacturing or processing household goods could achieve such large profits after Covid when consumers were under so much pressure.

The large corporates, again

It is the kind of statistic that has given corporate capitalism such a bad name. In the old days, if the uncle behind the counter put less candy apricots in your hand for the usual 20 cents without telling you the price had gone up and you were getting less, everyone in the village said he was a crook. Yet the industry sees this kind of behaviour as ethical. Even state institutions participate. This comes from a publication of the American Bureau of Labor Statistics: “Manufacturers change sizes because market research indicates that consumers are more sensitive to price change than size change."

A dubious price tactic is touted as a legitimate strategy. I am the last person to campaign for a nanny state, but in cases where the attack on consumers becomes so sly that too many people are victims of it, the state must surely play a role.

One of the elegant aspects of democracy and a free market is that it requires people to take responsibility for their well-being. This forces people to develop their critical faculties, including their ability to compare prices and make choices.

On the other hand, the right of traders and producers to push prices as high as they can before the market resists is one of the cornerstones of a free market. But then it must be clear and transparent. When it becomes too difficult for a consumer, even with the calculator on a cellphone, to compare unit prices, there is a problem.

Anyone who has passed grade 7 mathematics should be able to stand in front of a shelf with four products in different package sizes (none of which is a round number like 1 kg or 2 kg) and work out the unit price, the price per kilogram, for each. The problem is that when you do your big shopping once a month and spend thousands of rand, you cannot do the calculations on 35 different products.

Even with products that are legally required to display a unit price, like cheese, it becomes difficult to compare because the unit price is printed so small that you cannot see it. A few years ago, you could still compare shrink-wrapped cheeses with the honest old 1 kg blocks, but all the well-known cheese producers are now shrinkflation tricksters, and a 1 kg branded vacuum-packed cheese is an endangered species. You get anything from 950 g to 750 g. I have even seen a 600 g block of cheese  lying there in the fridge, trying to resemble 1 kg.

This trick makes it difficult for consumers but also for the people at Statistics South Africa who calculate consumer inflation, the consumer price index, based on a standard basket of products. The problem is that when the size of standard products regularly fluctuates and becomes obscure, there is a good chance that the people collecting the data will miss the changes, then our inflation figure is not accurate.

How can shrinkflation be addressed?

State institutions around the world have started growling at the shrinkflation tricksters. In France, finance minister Bruno le Maire said: “Shrinkflation is a scam, we're putting an end to it." Since July, supermarkets have had to clearly indicate for two months on food and other household products if the size has been reduced.

In Hungary, stores with a turnover greater than €2.5 million have to similarly indicate when package sizes are reduced. In the US, Casey introduced the Shrinkflation Prevention Bill, which could soon be a federal law.

And in South Africa? No signs of regulation yet. Here, you'll have to get out your calculator and work out the unit prices if you want to stay in control of your wallet. The alternative is to do more of your shopping locally — to buy your meat with a clear unit price at the butcher, the same with the local vegetable market, and to support cheese makers at the farmers' market who provide you with the weight you ask for.

Shrinkflation is just another symptom of the corrupt power that multinational companies have gained over states and governments. It is also a symptom of the relentless demand on companies to show growth and profits to their shareholders, even in times when it is impossible.

For those who appreciate the elegance and value of small-scale capitalism, it is a bitter pill to swallow.

♦ VWB ♦

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