Shrinkflation

How It Works

Shrinkflation is a stealth form of inflation that has become increasingly common in the food industry. Instead of raising the price of a product, manufacturers reduce the package size, a half-gallon of ice cream becomes 1.5 quarts (12% smaller), a "pound" of coffee becomes 12 ounces, a bag of chips drops from 16 oz to 13 oz. The BLS accounts for shrinkflation in its CPI calculations by tracking price per unit (per ounce, per pound), not per package. This means the CPI captures shrinkflation, if a box of cereal goes from 18 oz to 15 oz at the same price, the CPI registers a 20% price increase per ounce. Burgernomics is naturally resistant to shrinkflation because it tracks BLS average prices that are already expressed per unit (per pound for beef, cheese, bread, lettuce, and tomatoes). Notable recent examples of shrinkflation include Gatorade bottles shrinking from 32 oz to 28 oz, Doritos bags dropping from 10 oz to 9.25 oz, and Nature Valley granola bars losing one bar per box. A 2023 study by the Bureau of Economic Analysis estimated that shrinkflation accounted for about 0.3 percentage points of price-level increase not captured by conventional measures, though the BLS disputes this methodology.

Related Terms

• Food Inflation, The rate at which food prices increase over time, measured as a percentage change in the food component of the CPI, historically averaging 2-3% annually but spiking to 11.4% in 2022.
• Consumer Price Index (CPI), A measure of the average change in prices paid by urban consumers for a fixed basket of goods and services, published monthly by the Bureau of Labor Statistics.
• Greedflation, A theory that part of recent food price increases are driven by corporations widening profit margins under the cover of inflation, rather than solely by increased input costs.