Food & Climate
In pointed letters, U.S Sen. Elizabeth Warren of Massachusetts and Rep. Madeleine Dean of Pennsylvania are demanding some of the biggest food and beverage companies like General Mills, Coca-Cola and PepsiCo stop engaging in “shrinkflation” — the practice of reducing product sizes while charging prices that are the same or higher.
They accused these companies of engaging in a “pattern of profiteering” through shrinkflation and by “dodging taxes”, according a report seen by “Food & Climate” platform.
The letters, sent Sunday afternoon and shared first with NBC News, cite tactics the companies have used in recent years to increase their bottom lines.
General Mills, Coca-Cola and PepsiCo practices
General Mills, for example, reduced the sizes of many cereal boxes in 2021, “including decreasing ‘Family Size’ Cocoa Puffs from 19.3 ounces to 18.1 ounces while charging the same price,” the letter to General Mills Chairman and CEO Jeff Harmening read. It added: “Then, from mid-2021 to mid-2022, General Mills hiked prices five times, and in 2023, your Group President of North American Retail bragged that the company was ‘getting smart about how we look at pricing.’”
Coca-Cola has also downsized its products, too, said the letter to Chairman and CEO James Quincey, and it is “selling less soda for the same price.” The same with PepsiCo, which “replaced its 32 oz Gatorade bottle with a 28 oz bottle for the same price.”
“Shrinking the size of a product in order to gouge consumers on the price per ounce is not innovation, it is exploitation,” the letter to PepsiCo head Ramon Laguarta read.
Spokespeople for General Mills, Coca-Cola and PepsiCo did not immediately respond to requests for comment. PepsiCo has denied changing bottle sizes for profit; a spokesperson told CNBC in July that the 28-fluid-ounce bottle of Gatorade has existed for over a decade and that selling it more widely was part of the company’s long-term strategy, not a response to the current economic environment. Coca-Cola has explained its smaller bottles as a way to offer lower price points to budget-conscious consumers.
Regardless, Warren and Dean also accused the companies (General Mills, Coca-Cola and PepsiCo (of funding lobbying for Republican-led corporate tax breaks in 2017 that promised a trickle-down effect but instead “incentivized price gouging” because “corporations raised prices to pad their profits, knowing that lower corporate tax cuts meant they would get more back on each dollar of price increase,” all three letters said.
Citing a February analysis from the nonprofit Institute on Taxation and Economic Policy, the letter to General Mills said that in the first five years following the 2017 tax cuts, General Mills paid an average effective tax rate of 14.8% on its $12 billion in profits — a lower tax rate than many working individuals pay. Coca-Cola paid 13.5% in federal income taxes on its $13.4 billion in profits for the same time frame, the letter to its CEO said, while PepsiCo made $22.4 billion in profits during those years and paid an average effective tax rate of 15%.
Cookie Monster complains
Even Cookie Monster has opined on downsized products, lamenting on X in March: “Me hate shrinkflation! Me cookies are getting smaller.”
Cookie Monster is a blue Muppet character on the PBS/HBO children’s television show Sesame Street.
But to manufacturers looking to grow profit, especially in times of inflation as the costs of packaging materials and ingredients rise, reducing product size is often seen as a better move than upping prices, said Nailya Ordabayeva, an associate professor of marketing at the Boston University Questrom School of Business.
“Final price increases draw much bigger backlash than volume decreases,” she said. “So, between the two evils, the downsizing becomes a preferred option.”
That having been said, when shoppers notice that they have paid the same amount for less, particularly if it’s something they consume regularly compared with an indulgent item they buy only once in a while, “at that point they get upset,” Ordabayeva said.
But consumer frustration has not stopped shrinkflation. A report in December by the office of Democratic Sen. Bob Casey of Pennsylvania found that household products like toilet paper and paper towels were 34.9% more expensive per unit than in January 2019, with 10.3% of the price increase due to producers’ shrinking the sizes of rolls and packages. Meanwhile, snacks such as Oreos and Doritos had become 26.4% more expensive since January 2019, with 9.8% of the increase “accomplished by giving families fewer chips and cookies for their dollar,” the report said.
Sarah Gallo, senior vice president of federal affairs at Consumer Brands Association, a trade group that Coca-Cola, PepsiCo and General Mills all belong to, defended industry practices to NBC News.