Shoppers and grocery retailers are challenging brands to verify their increased costs.
Are you paying attention to the frustration your shoppers are experiencing as food prices continue to challenge budgets? I am and so should you! Our grocery shopping followers on Facebook and YouTube have a lot to say about the food crime of rising prices and shrinking packages.
Shrinkflation is the phenomenon that occurs when the size or quantity of a product is reduced, while the price remains the same or is even increased. Essentially, it is a tactic used by manufacturers to maintain profit margins in the face of rising production costs without visibly increasing the price of the product. The term "shrinkflation" is a combination of "shrink" and "inflation," reflecting the reduction in size and the increase in prices respectively.
But shoppers and grocery retailers are challenging brands to verify their increased costs. Chairman of Tesco, John Allen said it is entirely possible that some food firms are profiteering from inflation at the cost of some of the poorest consumers. He also told the BBC that Tesco's had a falling out with a number of suppliers following discussions over price hikes that the supermarket has challenged, they've created a new team to monitor food, import input costs against price rises. They're challenging companies that it believes are lifting prices disproportionately. They are not alone. Walmart WMT +0.2%, Hy-Vee, Giant Eagle, and many more are retailers that pushing back on price increases. The reason is simple: in the aisles and at the checkout, shoppers are pointing the blame for higher prices to the retailer instead of to the brands. The retailer has to fight back to protect their shoppers and their relationship with the shopper.
Coca Cola has announced that it will raise prices again in 2023 – the reason? They have “earned the right to price with the consumers” – through enhanced marketing and an agile packaging approach that balances premium and small entry level pack sizes for broader consumer appeal – according to the company. What does that even mean? CEO James Quincey on an investor call a week ago while discussing the company’s 4th quarter earnings, explained that even though the inflationary environment appears to be cooling Coke is expected to see elevated inflation across its operating costs. He went on to say that ‘it’s not our strategy to think of our business as commoditized where prices flow up and down in a kind of mechanical way. “We need to do our own pricing by delivering for the consumers value they appreciate through the marketing, innovation, revenue growth management, the pricing and packaging work, etc.” He explained on the call that Coca-Cola KO +0.5% has “earned the right” in part through increased marketing spend and creative campaigns that “link occasions and passion points to drive engagement”. In Coke’s 4th quarter organic revenue grew 15%. They are forecasting revenue growth of 708% in 2023 primarily led by the price increases and mix of products. primarily from price increases and RGM initiatives. Unit sales however declined 1%. When shoppers read these reports they are angry and frustrated - so, the war between shopper, supermarket and brands escalates.
Last week, I walked the supermarket aisles with Inside Edition to discuss examples of “shrinkflation” happening in stores. This is a topic that hits so close to home with consumers that on YouTube alone, the segment has already received over 550,000 views and prompted over 900 comments; and that’s in addition to the over 450 comments we received from our Facebook followers!
Here are some comments from today’s grocery shoppers:
“Bacon, bologna, any lunch meat. Canned meals like soup, stew or pasta. Crackers, cereal, breakfast bars, pop tarts, cookies, snacks. Hamburger Helper, rice, beans, pasta, any sauce, sugar, flour, corn meal, box of tea bags, canned beans, tuna, can of corned beef, it's all same size packages but less item in it and cost is way up.”
“This shrinkflation has to stop. I got Keebler crackers. They are down to three small sleeves, and the price is crazy. It’s a cracker people. That’s poor man’s food.”
“Reynolds kitchen oven bags. At one time I think there were 8 in the box, then 6 and now 5. Cake mixes are down from around 18 oz. to 15.25 oz., which affects certain recipes. For this reason, I make most of my cakes from scratch.”
“Frozen pizza is smaller. Could get nine slices, now barely eight.”
“Dog food- I used to could get a 50lb bag for $20-21 with tax now it's $25 for a 46lb bag, and they don't even make the 50lb bags anymore.”
“I buy canned Hormel Chili for quick lunches. It used to be so thick, I had to add water. Now it is so watery that I have to add crackers to thicken it.”
“Maybe I am crazy, but I was telling my wife that I think the size of a piece a bread is smaller than it used to be. Anybody else think this? Maybe 3/4 shorter and 3/4th inch less wide.”
“I’ve noticed this a lot the last couple of years! For example, Nabisco graham crackers —used to buy one box, 16 ounces. Now it’s 14 ounces and of course it cost more money! Same with mayonnaise. We used to get 32 ounces and now you get 30 and again it cost more!”
“Tuna fish smaller cans. Dog food smaller cans. Loaf of bread smaller. Margarine smaller container not much inside. Karo syrup smaller bottles. Campbells soup cans smaller. Bag of apples bruised and hollow inside. Saltines still 4 in box but crackers small and crumble. Just a few things I have experienced.”
“I noticed this too and thought I was crazy! I bought a bag of apple chips from Costco in Jan and the bag was huge. Went back in Feb and the bag shrank! It was literally a tiny bit bigger than a bag at a regular grocery store, smh!”
“I bought a Digiorno pizza on super bowl Sunday and was so shocked when I took it out the box! We had to order a pizza because it was so small”
“This has been going on for years. I’m old enough to remember when a single size cup of fruit at the bottom yogurt was 8 ounces. Then it shrunk to 6 ounces and now you’re lucky to get 5 ounces. I just buy the multi serve plain yogurt now.”
“That's been going on for decades, remember the new extra large Snickers?”
“If you factor in the shrinking of sizes, inflation has been much higher than reported. My cereal was $2.99 for 15oz… now it’s $5.99 for 10oz.”
“If food manufacturers continue to shrink the products, pretty soon everything at the grocery store will be trial sized.”
“This is outrageous! Not fair to consumers!”
These are just some of the sentiments aired by consumers, year-over-year inflation rates for foods eaten at home, as reported by USDA have increased more than in decades over the past 18 months. Consumers are trading to store brands, creating detailed shopping lists, using leftovers and doing whatever they can to keep to their budget. In just a few days the emergency SNAP benefits are expiring which will leave 30 million Americans with even less to afford food. The estimated average is about $82 less benefits per month. That will have a dramatic impact to those shoppers – but also to the supermarkets where they have been shopping. It will have a huge negative impact on their sales.
A more frugal grocery shopper is in the aisles today. Increasing prices has an effect on us all; and which demands even more transparency from our consumer packaged goods brands as to why their prices are increasing; otherwise expect shoppers to replace those products with other brands.