““If we make it smaller, we also make it cheaper.””
That was Kellogg CEO Steve Cahillane distancing his multinational food company from “shrinkflation,” aka when brands quietly shrink package sizes without lowering prices.
Shrinkflation tends to become more popular during periods of high inflation, as one way for companies to respond to rising costs. But while inflation in the U.S. may have reached its highest point in nearly 41-years, the Kellogg
head told CNBC’s Squawk on the Street on Thursday that, “our objective is not to actively engage in that.”
“What we try to do is make our products more affordable. If we make it smaller, we also make it cheaper,” he continued. “We think about the absolute cost, not necessarily working a margin play by shrinking a package and keeping the price the same.”
Cahillane did not specify during the interview whether his company has recently engaged in shrinkflation practices in any way, however, and he was not immediately available for comment.
But as inflation drives up prices of everyday goods, many companies have resorted to making their products or serving sizes smaller in order to maintain key, affordable price points for consumers. In the U.S., a small box of Kleenex now has 60 tissues, which is down from 65 a few months ago, according to the Associated Press. Chobani Flips yogurts have shrunk from 5.3 ounces to 4.5 ounces, the AP also reported. Other examples of shrinkflation include smaller bags of Doritos chips, fewer chicken nuggets in fast food meals and smaller dishwasher pods all becoming more common.
Generally speaking, companies would rather shrink the sizes of their products than raise the prices, Scott Rick, a marketing professor at the University of Michigan’s Ross School of Business, previously told MarketWatch.
Shrinkflation “can feel sneaky,” Rick said, but “it’s not unethical.”
Some shoppers may disagree, however. The word “shrinkflation” has started showing up in Yelp reviews for the first time ever. Reviewers have complained about smaller portions and higher prices, particularly in fast casual restaurants serving “more affordable offerings like hot dogs, hamburgers, pizza, followed by seafood restaurants, Italian food, and Chinese food,” the Yelp report said.
And according to Deloitte’s Global State of the Consumer Tracker survey, 79% of Americans say they are concerned about inflation. July’s 2022 Consumer Price Index (CPI) data is set to be released on Aug. 10, giving a more up-to-date inflation reading for the United States.
Looking for more information about inflation? Hear from Ray Dalio at the Best New Ideas in Money Festival on Sept. 21 and Sept. 22 in New York. The hedge-fund pioneer has strong views on where the economy is headed.