Companies are shrinking the size of their products to increase profits in a process known as shrinkflation, and global crises like COVID-19 and the war in Ukraine are exacerbating the issue, according to an economics expert at Binghamton University, State University of New York.
In recent years, manufacturers who can’t raise the cost of their products without fear of upsetting their customers have instead shrunk them, said Kenny Christianson, a lecturer in economics at Binghamton University. For example, Chobani flip yogurts which were once 5.3 oz. are now just 4.5 oz. for the same price; $2.99 bottles of Gatorade have been reduced from 32 oz. to 28 oz.
“You can increase revenues if you just raise the price of your product but, especially in competitive markets, it might be difficult to do that because you might lose a lot of your customers to their rivals if you raise your prices too much,” said Christianson. “You have to find other ways of increasing your profits or meeting your bottom line. So in order to do that, sometimes they can just either reduce quantity and keep the price the same or reduce quality. And then (that way, you’re able) to at least keep your prices a little bit lower than it would be if you had to keep the same quantity and quality.”
Christianson said that this phenomenon has worsened due to the impacts of the COVID-19 pandemic and the war in Ukraine.
“Labor costs and costs for fuel have been rising a lot because of COVID and shortages,” said Christianson. “And recently, increased demand has also been raising prices a lot. And so firms are faced with shrinking profits and maybe losses if profits shrink too much. And because of that, they’ve got to try to find some ways of trying to gain profits.”
