LONDON, July 16 — In the corridors of European supermarkets, a quiet recalibration of value is underway, one that alters the very geometry of everyday shopping. The phenomenon, known as shrinkflation, has become an increasingly familiar, if often invisible, force on shelves from Milan to Manchester. It is an economic mechanism whereby products shrink in size or quantity while their prices remain stubbornly unchanged, a subtle inversion of traditional inflation where prices rise for the same amount of goods.
The term itself is a portmanteau of ‘shrink’ and ‘inflation,’ coined as a direct counterpart to that more familiar economic ailment. Its first use with its current meaning is attributed to economist Pippa Malmgren, though historian Brian Domitrovic had earlier employed it to describe an economy shrinking alongside high inflation.
A related practice, skimpflation, involves reformulation or a reduction in product quality, further complicating the consumer’s ability to assess true value.
The Mechanics of the Invisible Price Rise
Against this backdrop of rising production costs, manufacturers and retailers face a strategic dilemma. Shrinkflation allows them to manage these increased expenses while maintaining sales volume, operating margin, and profitability. It is often deployed as a less confrontational alternative to raising prices in line with inflation.
The practice represents a rise in the general price level per unit of weight or volume, even as the price per individual piece stays the same. This can sometimes mean that traditional inflation measures, such as the Consumer Price Index or Retail Price Index, do not immediately register the change, though many indicators linked to units of volume or weight do capture shrinkflation within statistically represented inflation figures.
Academic economist Barak Orbach argues that competition itself drives shrinkflation. When supply shocks inflate production costs, businesses must pass on these increases to maintain profitability. However, direct price increases are risky in competitive markets, so companies raise prices indirectly through downsizing.
Macroeconomist Vivek Moorthy earlier documented this shrinkage effect of inflation, explaining it through Arthur Okun’s ‘invisible handshake’ approach. This theory posits that prices are based on trust and fairness; firms respond to cost increases but not to demand increases.
Consequently, fast-moving consumer goods companies shrink product size to avoid raising prices and retain loyal customers.
Consumer Criticism and Calls for Transparency
Consumer advocates are critical of shrinkflation, arguing it reduces product value by stealth. The small pack size reductions are not immediately obvious to the shopper, and unchanged prices prevent informed buying choices. Studies, however, show that consumers are more deterred by outright price rises than by pack size reductions, and some even prefer smaller packages at the old price.
This preference creates a perverse incentive for suppliers to continue the practice. Against this backdrop, calls for greater transparency have grown.
Professor Ratula Chakraborty of business management has argued that suppliers and retailers should be legally obliged to notify shoppers of pack size reductions. In 2023, French grocery chain Carrefour took a notable step, starting to warn customers directly about these practices on its shelves. Corporate bodies, for their part, sometimes deflect attention by claiming health benefits of smaller portions or environmental benefits of less packaging.
The wider picture is one of a persistent, structural shift in the relationship between price and quantity. What is at stake is not merely the weight of a chocolate bar or the volume of a detergent bottle, but the fundamental trust that underpins market transactions.
As production costs continue to face pressure from global supply chains, the quiet art of the downsized package may remain a fixture of the European shopping experience for some time to come. The question that lingers in the aisles is whether regulators will follow Carrefour’s lead in demanding that the invisible become visible.
