Grocers Shame Companies for Shrinkflation

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The Bidenflation era has forced companies and consumers to adapt to inflation. Many consumer products companies have implemented “shrinkflation” policies, which happens when a company offers a smaller amount of a product for the same price it had previously offered the larger amount. Grocery stores are now calling out their suppliers for shrinkflation tactics. Mark Faithfull reports in The Robin Report:

Shrinkflation is not a new phenomenon, but the practice has ramped up over the past couple of years, with many major brands sensitive about raising the price preferring to downsize and apparently hold the retail price. Now Carrefour and PepsiCo battle over pricing, making headlines and shaking up the industry.

Carrefour was central to bringing French consumers’ attention to shrinkflation. In September it carried out a preordained threat and put stickers on its shelves highlighting new pricing to its customers across a number of key brands, singling out Lindt chocolate, Lipton Ice Tea, and Viennetta ice cream for criticism.

Brand Wars

So, here’s the problem. PepsiCo signaled last fall that it intended to introduce some “modest” price hikes without disclosing the exact size of those rises. Already severely vexed by shrinkflation (the aforementioned act of downsizing products but maintaining the price), Carrefour labeled the U.S. giant’s requests “unacceptable” and as of the turn of the year is no longer selling Pepsico’s products in France, Spain, Italy, Belgium and, most recently Poland.

In response, PepsiCo issued a statement simply saying: “We’ve been in discussion with Carrefour for many months and we will continue to engage in good faith in order to try to ensure that our products are available.” So, what exactly is behind the dispute and the frankly radical action of a major grocery chain to remove the products of one of the globe’s biggest FMCG brands from its stores?

Inflation Meets Shrinkflation

Like so many countries, France endured a year of persistently high inflation across 2023, notably in food, and although the final month of the year saw food inflation ease a little it still remained at a consumer-squeezing 7.1 percent.

That food inflation –- blamed on political and economic instability from Ukraine to the Middle East –- also shone a light on manufacturers’ pricing strategies, especially given that the grocery chains tend to be in the firing line of customer ire when prices spike upwards. In particular, it highlighted the growth of shrinkflation.

Carrefour was none too pleased and was central to bringing French consumers’ attention to this practice. In September it carried out a preordained threat and put stickers on its shelves highlighting shrinkflation to its customers across a number of key brands, singling out Lindt chocolate, Lipton Iced Tea, and Viennetta ice cream for criticism.

Carrefour highlighted these products with five-inch square, orange-backed shelf signs reading: “This product has seen its weight drop, and the price charged by our supplier increase,” and adding: “We undertake to renegotiate this tariff”.

Highlighting FMCG Companies

In its initial campaign, Carrefour picked out 26 products that had shrunk, without a commensurate price reduction; among them were Nestlé’s Guigoz infant milk formula, where the pack size had fallen from 900g (just under 2lbs) to 830g; a bottle of sugar-free Lipton Iced Tea, from PepsiCo, which had shrunk to 1.25 liters from 1.5 liters (0.33 gallon), representing a 40 percent increase in the price per liter, and Unilever’s Viennetta ice cream, which has downsized from 350g to 320g, an 8.5 percent reduction.

“Obviously, the aim in stigmatizing these products is to be able to tell manufacturers to rethink their pricing policy,” said Carrefour’s director of client communications, Stefen Bompais.  At the time of the move, Carrefour chief executive Alexandre Bompard, who also heads the retail industry lobby group FDC, repeatedly complained that despite the cost of raw materials dropping, the FMCG giants were not reducing prices.

Intermarché Joins the Dispute

Rival French grocery group Intermarché has also highlighted some products in store over shrinkflation, starting last summer, as it told shoppers that its “role is to offer you your favorite brands but also to alert you to these behaviors”.

Read more here.