"I'm sure you used to get more crisps in this packet."
"There's more air than food in this bag!"
"Is it just me or does this chocolate bar seem smaller?"
If you're like myself, you've probably found yourself asking a lot of these questions in recent years; doubting if the crisp packets seem emptier or if the chocolate being smaller than you remember is just a figment of your imagination. In truth, the likely answer is that you're not imagining it, as figures from the Office for National Statistics (ONS) show that between January 2012 and June 2017, 2,529 products had shrunk in size, however their price had remained the same. This ranged from food and drink all the way to essentials such as toilet roll.
Most recently, Cadbury has announced that by the end of 2020 chocolate bar multipacks will contain no more than 200 calories each when sold in a four-pack, however the price of the packs will remain the same. As a result, I decided to take a look at the research into 'shrinkflation' and uncover the reasonings behind the tactic Cadbury and many other brands choose to employ, and the extent of its legality in the law of the United Kingdom.
Some Key Terms
The Economics of Product Downsizing
The tactic of 'shrinkflation' (or 'product downsizing') appears to have become a regular occurence in our modern society. We have seen many famous examples in recent years, such as Toblerone bars reducing from 200 grams to 170 grams in 2010 and Coca-Cola slashing the size of its large bottles from 2 litres to 1.75 litres in 2014. This increase in product downsizing however is not random, and is often the result of various economic pressures.
One example of this is higher production costs. The Corporate Finance Institute (CFI) asserts that this is the main cause of product downsizing, and is a result of an increase in the costs of manufacturing fees such as ingredients or labour causing the decline of profit margins. By keeping the same price tag but reducing the volume or quality of their product, companies can help restore these profit margins to meet with the higher production costs.
The CFI also highlights intense market competion as a contributing factor to product downsizing. The huge variety of available substitutes for products in the food and beverage market makes it an extremely comepetitive industry. This means that it is vital that brands look for ways to maintain their profit margins while also avoiding increased price tags to make sure customers do not look elsewhere at competitors.
The Controversy
In their recent announcement, Cadbury highlighted that the planned changes for the calorie reductions were to help with "tackling obesity ". While this may seem to be a feasible rationale given the statistics that 30% of the world's population is classed as obese, it is questionable whether there are actually alterior motives for product downsizing that centre more around the economic reasonings outlined above.
Mark Jones, a food and drink supply chain expert at law firm Gordons, told the BBC that 'when the producers are caught [downsizing products], they are likely to point to the obesity epidemic as their motivation rather than their margins". In a paper addressing the unfairness of 'shrinkflation' on consumers, Golovacheva highlighted that companies will often use this benign rationale such as healthy eating to justify their product downsizing. Research shows that this justification by brands comes with the growing media reaction to 'shrinkflation' and the preceding negative response from consumers, both before and after purchase of the product. Beforehand, the noticing of downsizing can result in less favourable attitudes towards brands by consumers (Kachersky, 2011). After purchase, consumers can experience cognitive dissonance, which then results in negative post purchase behaviours including brand switching and poor reviews through word of mouth. This so demonstrates how a company's attempts to help boost their profit margins by downsizing products and cover up their true rationale can often have a negative effect on the consumer's opinion of the brand. This could then have a negative effect on the profit margins they set out to improve in the first place and cause consumers to turn to other brands instead.
Why a change in product quantity rather than price?
The concept of Raghubir and Srivastava's anchoring and adjustment model is a key basis for explaining why companies would choose to maintain price while reducing quality/quantity. The model is centered around a formula which you can see in page 8 of this article. In summary, the model conceptualises that changes in price have a much greater impact on consumer judgment and choice than changes in quality/quantity. Therefore, while there can be an increase in negative opinions of brands based on product downsizing, the anchoring and adjustment model suggests that a step in the other direction by changing price would have a much worse effect on consumer opinions. This so shows why brands would choose a 'shrinkflation' model of increasing profit margins rather than a price increase.
So, is it illegal?
While it seems that product downsizing does raise questions from a moral and ethical standpoint, the actual tactic of ‘shrinkflation‘ is not illegal in itself.
If we look at the Misrepresentation Act (1967), the statute makes it illegal for companies and traders to induce consumers into buying products or services through false or fraudulent claims. This misrepresentation can be done fraudulently, negligently or innocently, but all are covered under the 1967 Act in order to protect consumers from being misled by companies. Products downsizing is (in the vast majority of instances) not a form of misrepresentation as, while perhaps not explicitly announcing the changes in press statements, companies will change the packaging on their product to reflect the change in weight or size of the item. Let's break this down into an example:
ABC Chocolate's best selling chocolate bar, 'The Crunchy One', has always been 40 grams in weight. ABC Chocolate have decided that, due to an increase in the costs of producing 'The Crunchy One', they want to reduce the weight of the bar to 38 grams but still charge the same price as before. While they have decided not to make a public statement announcing the changes, they have made sure that the weight of the chocolate bar has been changed on the packaging from 40 grams to 38 grams. In this way, they are not misrepresenting their product as the consumer will be made aware of the new weight of the product through the packaging before they buy, and are therefore not in breach of any consumer law.
As we can see, while the product down-sizing has taken place arguably beyond the consumer's awareness, the presence of the new listed weight on the packaging means that ABC Chocolate would likely be protected against any claims for misrepresentation from the consumer as the customer has not been misled by the packaging of the product. Therefore, the reduction of the amount of product may cause some animosity towards the brand by the consumer (Kachersky, 2011), but there is no infringement of the law as long as companies reflect product changes on their packaging.
To Conclude
It seems fair to say that there is little doubt that 'shrinkflation' causes upset amongst consumers, with the ways in which brands often justify and approach their product downsizing causing controversy and raising questions of moral significance. However, while the ethical question of product downsizing is debateable, it seems the legality of the tactic is not. The change of product weight or ingredients on packaging makes it unlikely brands will be seen as misrepresenting their customers under UK statute law. It is imaginable with the current economic climate that product downsizing by companies of the likes of Cadburys will not slow down, and so keep your eye on packaging to look for any changes in your favourite brands.
Brilliant article and also explains the size of the boxes of chocolates brought out at Xmas time which have shrunk year by year and stayed the same price