How Companies Can Sneak In Higher Prices : Planet Money : The Indicator from Planet Money Inflation is the talk of the town recently, but some companies are shrinking the size of their products and charging the same price, aka "shrinkflation". Today we explore the booming market of inflation's sneaky cousin.

Shrinkflation: Inflation’s Sneaky Cousin

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SYLVIE DOUGLIS, BYLINE: NPR.

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GREG ROSALSKY, HOST:

A couple weeks ago, Edgar Dworsky walked into a stop-and-shop grocery store in Somerville, Mass., like he was a detective entering a crime scene.

EDGAR DWORSKY: I looked in the cereal aisle.

STACEY VANEK SMITH, HOST:

Edgar searched the aisle hoping to find the smoking gun, but he was too late. The store had already replaced old General Mills cereal boxes with newer ones.

DWORSKY: So I was a little down. So I started walking around the store, and then, lo and behold, there's an end-aisle display of some General Mills cereals.

ROSALSKY: So he grabbed an old box of Cocoa Puffs, and he put it side by side with a new box of Cocoa Puffs.

VANEK SMITH: The tip Edgar had received was right on the money. General Mills had downsized the contents of their family-sized boxes from 19.3 ounces to 18.1 ounces.

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DWORSKY: I actually took them up to the scanner, and they were all on sale for the same price. They all rang the same even though they were different sizes.

VANEK SMITH: Edgar is a former Massachusetts assistant attorney general and a longtime consumer advocate. He has spent decades tracking these crimes.

ROSALSKY: Which is why when he discovered the tip he had received was true - that General Mills had in fact shrunk its family-size boxes of cereal - he wasn't so surprised. It was just one more open-and-shut case of shrinkflation (ph).

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VANEK SMITH: Shrinkflation?

ROSALSKY: Shrinkflation - it's when companies shrink the size of their products while charging the same price or even more. Lately it seems there's a whole bunch of companies doing it. This is THE INDICATOR FROM PLANET MONEY, and we're on the case.

I'm Greg Rosalsky.

VANEK SMITH: And I'm Stacey Vanek Smith. Today on the show, we investigate shrinkflation - inflation's subtler, smaller cousin.

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VANEK SMITH: Inflation, of course, is when the price of things goes up.

ROSALSKY: Stacey, inflation is totally old news. Like, we're here to talk about shrinkflation. That's when the price stays the same but the size of products goes down. Edgar Dworsky, he spent decades finding evidence of it. His garage has become, like, an evidence locker of the shrinkflation police department.

DWORSKY: I have the original 16-ounce Maxwell House coffee can in the garage, the original Tropicana 64-ounce carton of orange juice...

VANEK SMITH: You know, orange juice, tuna cans, peanut butter jars, cereal boxes, butter - everything you can think of has gotten smaller.

DWORSKY: But it got to a point where I was running out of space to warehouse them.

VANEK SMITH: So, of course, the U.S. has a reputation for supersized products. Like, we are known for all things giant, right? Still, Edgar's garage makes it clear that we used to be a lot more supersized.

ROSALSKY: The term shrinkflation is actually somewhat new. It was coined by the economist Pippa Malmgren about a decade ago. But Edgar actually prefers referring to the practice by, like, an older name - downsizing. It means the same thing, and it's probably as old as mass consumerism.

DWORSKY: Well, there's an old story - and I don't know if it's true or not - that downsizing began in the days of nickel-candy vending machines, that apparently the price of chocolate was going up, and the manufacturers notified the vending machine companies - you know, we have to charge more. And the vending machine folks said, well, wait a minute - how is that going to work in our machines? So someone came up with a brilliant idea. Oh, let's make the candy bars a little bit smaller so the vending machine people could still charge a nickel.

VANEK SMITH: Edgar says that companies tend to resort to shrinkflation for the same reason that they resort to inflation, which is when they have to deal with rising business costs.

DWORSKY: Because consumers are not net weight-conscious. They're price-conscious but not net weight-conscious.

ROSALSKY: So it's like stealth inflation, basically.

DWORSKY: Right. Basically, you're paying more. The product is going to run out sooner. It is a sneaky way to pass on a price increase.

ROSALSKY: So if consumers were, like, the rational creatures depicted in, you know, classic economic theory, we wouldn't be tricked by shrinkflation.

VANEK SMITH: Right. We'd be all about the net weight (laughter).

ROSALSKY: We would keep our eyes on the price per Cocoa Puff. We wouldn't fall for gimmicks in how companies packaged those Cocoa Puffs.

VANEK SMITH: But of course, you know, research shows that consumers are a lot more gullible than classic theory might assume. They are more sensitive to changes in the price of a product than they are to the quantity of the product they're buying. So when companies have to deal with rising business costs, shrinkflation becomes a really attractive option.

ROSALSKY: Which is why when America started seeing surges in, like, the price of everything from gasoline to food, Edgar was on the lookout for inflation's devious cousin. And we're now actually seeing that. We're seeing this wave of shrinkflation, from Tillamook ice cream to Royal Canin cat food.

VANEK SMITH: So a lot of consumers are pretty oblivious to shrinkflation, but many consumers are not. And some people get very, very into this. In fact, there's a whole thread on the website Reddit that is just dedicated to shrinkflation. It is, like, full of photos of smaller packages and net weights. And it is, of course, fueled by outrage and annoyance of, like, movie theaters shrinking the size of their popcorn, pizza places shrinking the size of their pizzas. Recently, of course, Greg, there was a post about the downsizing of General Mills' cereal.

ROSALSKY: So the company announced last week that the rising cost of ingredients and packaging and labor and trucking and all of the intricate, you know, symphony that it takes for you to get your Cocoa Puffs - that rising cost was forcing them to revamp their business. So we reached out to General Mills about reports that they're downsizing their cereals as part of this strategy. So they provided us with this statement. The change they say is all about creating consistency and standardization across these cereal products. This, they say, quote, "allows more efficient truck loading, leading to fewer trucks on the road and fewer gallons of fuel used, which is important in both reducing global emissions as well as offsetting increased costs associated with inflation," end quote.

VANEK SMITH: So they're saying that making smaller boxes of Cocoa Puffs is better for the planet?

ROSALSKY: (Laughter) I - you know what? I'm not here to judge them, but maybe Edgar is.

DWORSKY: Well, it sounds like PR speak (laughter). This one is kind of a novel explanation, if you will, that they're saving gas so they can pack more boxes, you know, into trucks. What they're not accounting for is the product is going to run out sooner. That means the consumer has to make another trip to the supermarket sooner they anticipated.

ROSALSKY: To be fair to General Mills, like a lot of companies these days, they are dealing with increased business costs - you know, higher gas, higher costs of grain. And, you know, shrinkflation is just their way of dealing with it.

VANEK SMITH: And a lot of companies are responding in kind of a similar way. A spokesperson for Charmin, for example, was confronted by reporters at WBUR about the shrinking size of their toilet sheet squares and suggested that it was the result of innovations that basically allow customers to more efficiently wipe their behinds. Apparently, we're just getting better at using toilet paper, so we don't need as much of it, Greg (laughter).

ROSALSKY: (Laughter) Keep it classy, Stacey. If this keeps up, though, I'm, like, imagining this, like, Lilliputian dystopia where we're, like, all forced to, like, eat miniature candy bars and drink tiny drinks and...

VANEK SMITH: (Laughter).

ROSALSKY: ...Wipe our bottoms with teeny-tiny squares of paper. But hopefully not, you know? Like, maybe consumers will actually kind of wake up to all this and voice concern, and the power of consumer demand will force companies to listen and upsize their products. But until then, our prayers are with the lovers of Cocoa Puffs.

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VANEK SMITH: This episode of THE INDICATOR was produced by Brittany Cronin with help from Gilly Moon. It was fact-checked by Michael He. THE INDICATOR's edited by Kate Concannon and is a production of NPR.

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