- Shrinkflation is the principle of making products smaller while retaining the same price point
- Food prices are up over 30% since 2019, and green coffee prices are up by over 30% since January
- Companies are scrambling to save their bottom line, and consumers are getting dragged along with them
SMALLER product sizes for the same price might sound like robbery in broad daylight, but it’s become ubiquitous across various industries – including the coffee sector.
Known as shrinkflation, it has gained significant media attention, with high-profile figures like US President Joe Biden calling it out as an unethical tactic deployed by big businesses.
It involves making products smaller or offering less quantity while maintaining the same price point, a tactic many companies use to mask the impact of rising production costs.
In the broader market, shrinkflation is evident across a range of products. For example, a box of Kleenex in the U.S. now contains 60 tissues, down from 65, and Chobani Flips yoghurts have decreased from 5.3 ounces to 4.5 ounces. In the U.K., Nestlé’s Nescafe Azera Americano coffee tins have also been reduced, from 100 grams to 90 grams.
The coffee industry has not been immune to the trend. Even in US supermarket coffee aisles, Folgers has downsized its 51-ounce container to 43.5 ounces – though the company claims a new technology results in lighter-weight beans, allowing it to make up to 400 cups.
In the specialty coffee sector, shrinkflation is not a new concept, but rather, an evolution of the industry’s long-standing tradition of creating value from scarcity. Specialty coffee has always been about rarity and exclusivity, from the prized Geisha varieties to the rare Cup of Excellence (CoE) lots.
Recent trends reflect this ethos through the introduction of smaller packaging sizes, such as 50-gram packets, which cater to the premium positioning of specialty coffee and consumers looking for exclusive and rare lots.
“Shrinkflation has been around for a very long time. It happens in chips, candy bars, ice cream, and of course, coffee – the reason consumers haven’t noticed it is because inflation had been low for 40 years,” says Mark Stiving, Chief Pricing Educator at Impact Pricing.
“Companies would use shrinkflation every few years. In the last 3 years, inflation drove costs very high and companies could either raise their prices or reduce the amount they sold for a given price. Consumers are more price-sensitive than size-sensitive, so it’s less painful to reduce the size.”
These examples illustrate a broader trend where consumers are paying the same price for less product, impacting their wallets and raising questions about the honesty and ethics of such practices. But where exactly has shrinkflation emerged from, and it is here to stay in the coffee sector?
Inflation is the mother of shrinkflation
The term “shrinkflation” was coined by British economist Pippa Malmgren in 2009, describing a phenomenon where inflation, the general rise in prices, forces companies to reduce the quantity of their products rather than increase prices.
This tactic helps companies manage rising production costs without explicitly raising prices, which can be less visible to consumers.
In recent years, inflation has been a significant driver of consumer control tactics that save or benefit companies’ bottom line – shrinkflation, skimpflation, and surge pricing are all examples of this.
Rising costs of raw materials, labour, and transportation have pressured companies to find ways to maintain profit margins.
For instance, data from the U.S. Bureau of Labor Statistics shows that the Consumer Price Index (CPI) for food items increased by 2.2% over the last year, and grocery prices are up over 30% since 2019 – reflecting broader inflationary pressures. Over 90% of consumers are concerned with high food costs, and 70% are financially stressed.
Shrinking product sizes is not merely a matter of corporate greed; it is a direct response to these rising costs. Consumers are feeling the pinch as their cost of living increases, and the subtle price hikes due to shrinkflation contribute to their sense of being cheated. In France, Carrefour supermarkets have started indicating products that have undergone shrinkflation, highlighting the trend’s growing visibility.
In the coffee industry, shrinkflation is working from the top down, from larger companies and chains to smaller coffee shops and roasteries. Starbucks is reducing the weight of several of its products, and Dunkin’ has made similar changes.
Despite maintaining a similar price point, customers are now receiving less coffee, representing a subtle price increase per ounce. And although many consumers feel outraged or cheated over paying the same price for less product, some view it as a natural behaviour in consumer markets.
“Consumers can feel however they want,” Mark says. “They also get to choose what to buy. If the price/size becomes too high, they should switch to something else. This is capitalism.”
Long-term shrinkflation can lead to customer dissatisfaction and potential loss of loyalty. A study by the market research firm IRI found that persistent shrinkflation can erode consumer trust and prompt them to seek alternative brands or products.
An unfortunately lasting trend
Despite growing frustration, shrinkflation appears to be a lasting trend. Consumers are increasingly aware of the discrepancy between price and product size, often feeling that they are getting less value for their money.
However, the sheer amount of brands adopting shrinkflation tactics is leaves consumers with few alternative choices – leaving them with no choice but acceptance.
“If shrinkflation didn’t happen, companies would be offering specialty coffees at much higher prices,” Mark says. “This is called segmentation and happens in most industries. Think of first class versus economy in aeroplane seating.”
In the coffee sector, roasters are grappling with high costs across the value chain, from sourcing to roasting. These costs inevitably influence product sizing and pricing, making shrinkflation a practical albeit unpopular solution.
Green coffee prices have risen more than 30% since the start of 2024 because of supply chain disruptions and climate change impacts, pushing roasters to make urgent adjustments.
Shrinkflation is a positive step for many companies’ bottom line, providing consistent revenue for less amount of product sold. However, it may be possible that the backlash and frustration from consumers may force some coffee companies to take a backward step and rethink such strategies.
“Companies make decisions in their own best interest, just like consumers do,” Mark says.
“Notice that McDonald’s raised prices a lot over the last three years, and their sales went down. They are now figuring out how to offer lower prices. So yes, it’s possible.”
Consumer reactions to shrinkflation often include brand switching and increased scrutiny about which companies to buy from. There’s even a dedicated subreddit, r/Shrinkflation, where users share and discuss instances of product downsizing. Such communities reflect a growing awareness and dissatisfaction with the practice of shrinkflation, as consumers are more mindful of spending and the tactics of pricing.
In the specialty coffee market, where consumers value quality and exclusivity, the impact of shrinkflation may be particularly pronounced. As the industry navigates these economic challenges, both consumers and companies will need to adapt to a landscape where size and value are increasingly at odds with each other.
“Consumers make their own decisions on how they spend their money. If the price of coffee goes up faster than other items, fewer people will drink coffee,” Mark says. “If overall inflation exceeds the pace of income growth, some items will be cut from the food budget. Coffee is likely going to be one of those items.”
Although viewed by many as a greed-driven practice, shrinkflation is a complex issue driven by economic realities and industry practices – and isn’t going anywhere any time soon.
As consumers become more aware of these subtle price increases, the challenge for coffee brands will be to balance their cost management with maintaining consumer trust and loyalty.
Coffee Intelligence
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