What is “shrinkflation” and how can we spot it?

Have you ever been to the grocery store and felt like that box of cereal got a little lighter? Well, you aren’t going crazy–shrinkflation is when companies reduce the volume of a product instead of increasing its price. Hitendra Chaturvedi of ASU’s W.P. Carey School of Business joined us to explain.

“Shrinkflation is when the things in boxes at the grocery store, you start to feel that the sizes are decreasing but you seem to be paying either the same price or even a bit more,” Chaturvedi said. “You can’t check it because the box that you bought a month ago is already in the garbage bin.”

Chaturvedi likened the process to the scientific Law of Thermodynamics. In the same way that energy can be neither created nor destroyed, the consumer has to answer somehow to an increase in price of raw goods or materials. He also explained that, in many ways, shrinkflation is just another example of plain-old inflation.

For example, if the net weight of a box of cereal decreases from 16 ounces to 14 ounces, then it has decreased in size by 15%. If the price of the cereal box stays the same on the shelf and doesn’t change despite the decrease, then it is inflation under another name.