These 10 Products Are Most at Risk for ‘Shrinkflation’

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Are you thinking about using “shrinkflation” for your small business? See which product categories are shrinking — and why it can be a bad strategy. [[{“value”:”

Small businesses are trying their hardest to cope with high inflation. Whether it’s supply chain disruptions, inventory problems, material shortages, or other challenges, many small businesses have seen their costs of doing business go up during the past few years.

Unlike big corporations that have scale and bargaining power to raise prices on consumers, small businesses get stuck in the middle. Small businesses are often reluctant to try to pass their higher costs on to customers.

A recent survey from Clarify Capital found that 12% of small businesses have implemented “shrinkflation” as a way to navigate higher costs and price-sensitive customers. With shrinkflation, businesses find ways to repackage, reformulate, or otherwise sell products in smaller amounts or quantities, but at the same (or slightly higher) price. Instead of raising sticker prices on customers, shrinkflation can be a subtle way to control costs and maintain profitability.

Let’s look at some consumer survey data from Clarify Capital to see which product categories are most likely to “shrink” in 2024.

Top 10 products affected by shrinkflation

The Clarify Capital shrinkflation study interviewed consumers to see how people feel about shrinkflation, and which products are noticeably “shrinking” the most. A whopping 81% of consumers said they have noticed shrinkflation, 78% said they’re “worried” about it, and 82% believe that shrinkflation will increase.

Here are the product categories where consumers say they have noticed shrinkflation happening most often:

Snacks (noticed by 80% of consumers) Candy (55%)Personal care (46%)Cleaning (41%) Produce (34%) Coffee (28%)Meat/fish (26%)Dairy (22%)Chewing gum (11%) Eggs (9%)

There is some room for debate about how accurate these consumer perceptions of “shrinkflation” really are. After all, some products cannot reasonably be “shrunk.” One pound of ground beef still weighs one pound, even if it gets packaged differently. Eggs are regulated by the USDA and labeled as “Grade A” or “Grade AA;” it seems hard to believe that there’s any way for eggs to get “smaller,” even if the price of eggs recently reached painfully high levels for many grocery shoppers.

But it’s clear that many consumers feel like they’re seeing smaller sizes and packaging amounts on grocery store shelves. And “the customer is always right,” right? Small business owners need to be aware of this price-sensitivity and skepticism that consumers are bringing to the conversation — the Clarify Capital survey also found that 96% of consumers do not believe that businesses are transparent about shrinkflation.

How shrinkflation is playing out for various industries

If your small business is in the snacks, candy, personal care, or cleaning products industries, you might feel price pressure to offer smaller sizes (but without reducing the retail price). A common strategy might be to offer slightly smaller bottle sizes of shampoo or soap, or offer packaging with one fewer item in the box.

It’s also interesting to note that some of the product categories where consumers are noticing the most “shrinkflation” are also the categories where small businesses are under the most pressure from rising costs of supplies and materials.

Snack industry (shrinkflation noticed by 80% of consumers)

Consumers aren’t the only people noticing shrinkflation in snacks — politicians are noticing too. U.S. Senator Bob Casey’s office released a report in December 2023 which claimed that snack prices have gone up by 26.4% since January 2019, and 9.8% of that price increase is attributable to “giving families fewer chips and cookies for their dollar.” President Biden even posted a video on social media in February 2024 where he called upon companies to stop shrinkflation for snacks.

Candy industry (55% of consumers noticed shrinkflation)

The candy industry is facing a huge global crisis in 2024 due to skyrocketing prices of cocoa. Cocoa shortages have made all mass-produced corporate brand candy bars and small-batch artisanal chocolates much more expensive to make (and less profitable to sell).

Coffee industry (28% noticed shrinkflation)

Coffee prices are also surging, due to poor crop yields in major coffee-producing regions of Indonesia and Vietnam. This can make it harder for restaurants and coffee shops to be profitable while charging their usual price for a cappuccino.

How your small business can handle “shrinkflation”

Here’s the biggest problem with “shrinkflation” as a pricing strategy: consumers don’t like it. In fact, 68% of consumers told Clarify Capital that they have switched brands because of shrinkflation, and 45% chose generic alternatives. The way your business handles shrinkflation is an opportunity for your business to build trust with customers — or lose customers.

Shrinkflation isn’t just about pricing, it’s about small business marketing. Instead of sneakily giving customers less food, coffee, or chocolate for their money, your business can be a leader and build stronger customer relationships. If you run a small confectionery business or chocolate shop or personal care products company, now is a good opportunity to be transparent with your customers about pricing. Show them how hard you’re working to keep prices low, or if you have to increase prices, show them why your business is getting squeezed by larger forces in the global economy.

Bottom line

Using shrinkflation might not be a smart strategy for your business. Shrinking the size of your products or packaging while keeping prices the same can leave your customers feeling short-changed and deceived. Instead, more small businesses should consider raising their prices in a fair, transparent way that builds trust with customers.

Go deeper into your customer relationships. Deliver more value. Show your customers why they don’t want to replace your product with a cheaper brand. Avoiding shrinkflation might be an opportunity to stand out from your competitors and build customer loyalty.

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