Two Democratic senators are calling on some major food and beverage companies to end “shrinkflation,” the practice of shrinking the size of a product while charging the same or higher price.
In a scathing letter, Sen. Elizabeth Warren of Massachusetts and Rep. Madeline Dean of Pennsylvania accuse General Mills, Coca-Cola and PepsiCo of a “pattern of profiteering” through shrinkflation and “tax avoidance.” accused of being involved in. The letter, sent Sunday afternoon and first shared with NBC News, cites tactics the companies have used in recent years to increase profits.
General Mills, for example, will reduce the size of many cereal boxes in 2021, “including reducing the price of ‘Family Size’ Cocoa Puffs from 19.3 ounces to 18.1 ounces, while keeping prices the same.” said the letter to Mills Chairman and CEO Jeff Harmening. “Then, from mid-2021 to mid-2022, General Mills raised prices five times, and in 2023, the group president of North American retail said the company was “getting smarter about how it thinks about pricing.” He boasted,” he added.
Coca-Cola is also reducing the size of its products, “selling fewer carbonated beverages at the same price,” according to a letter to Chairman and CEO James Quincey. PepsiCo is doing the same, “replacing 32-ounce Gatorade bottles with 28-ounce bottles for the same price.”
“Shrinking the size of products in order to increase the price per ounce for consumers is not innovation, it is exploitation,” the letter to PepsiCo chief Ramon Laguarta said.
Spokespeople for General Mills, Coca-Cola and PepsiCo did not respond to requests for comment. PepsiCo denied changing the size of its bottles for profit. A spokesperson told CNBC in July that Gatorade’s 28-fluid-ounce bottles have been around for more than a decade, and that selling them more widely is part of the company’s long-term strategy and that the current economic environment He said it was not a response to the issue. Coca-Cola says it is developing smaller bottles as a way to offer lower prices to budget-conscious consumers.
Despite this, Warren and Dean were also accused of funding lobbying for Republican-led corporate tax cuts in 2017, promising corporations a trickle-down effect but instead It was accused of “encouraging price gouging.” Lower prices mean you get more back for every dollar you raise,” all three letters said.
The letter to General Mills cited a February analysis by the nonprofit Institute on Taxation and Economic Policy that found that in the first five years after the 2017 tax cut, General Mills had a It said it paid an average effective tax rate of 14.8%. A lower tax rate than many working individuals pay. According to the letter to CEOs, Coca-Cola paid 13.5% federal income tax on $13.4 billion in profits over the same period, while PepsiCo earned $22.4 billion in profits over the same period and had an average effective tax rate of It was 15%.
“People are realizing that a box of Cheerios or a bag of Doritos may be small, but the price is high. At the same time, these giant corporations pay a lower tax rate than the average American,” Warren told NBC News. said in a statement. “We can’t let them get away with this kind of price gouging and tax avoidance. It’s clearly wrong and we’re fighting back.”
The decline in consumer goods is not limited to soda and cereal. MousePrint.org, a website that tracks retail products, has found that razor packs that once contained 36 razors are now down to 30, and packages that once contained a bag of almonds are now available in smaller sizes. We are focusing on products whose prices have fallen but have not. From 30 oz to 25 oz.
President Joe Biden has mentioned shrinkflation multiple times and declared it a “rip-off” in a video posted to X. In this year’s State of the Union address, he urged Congress to pass legislation to crack down on shrinkflation by regulating it. That’s unfair or deceptive.
Even Cookie Monster has weighed in on product downsizing, lamenting in March about X, “I hate shrinkflation!” Cookies are getting smaller. ”
But Nailya Ordabaeva, an associate professor of marketing at Boston University, says that for manufacturers looking to increase profits, reducing the size of a product can help lower prices, especially in times of inflation when the cost of packaging and raw materials is rising. He said that this is often seen as a better measure than raising the tax rate. Questrom Business School.
“An eventual price increase will cause a much greater rebound than a volume decline,” she says. “So between two evils, downsizing is the preferred option.”
That said, when a shopper realizes they’re paying less for the same amount, especially if it’s something they consume regularly compared to a luxury item they buy only once in a while, “at that point they get upset.” ” said Ordabaeva.
But consumer dissatisfaction hasn’t stopped shrinkflation. Household items like toilet paper and paper towels are 34.9% more expensive per piece than they were in January 2019, according to a report released in December by the office of Pennsylvania Democratic Sen. Bob Casey. It was found that 10.3% of this was due to a reduction in producer demand. Roll and package size. Meanwhile, snack foods like Oreos and Doritos have increased in price by 26.4% since January 2019, with 9.8% of that “achieved by reducing the amount of chips and cookies given to families for each dollar,” the report said. states.
Sarah Gallo, senior vice president for federal affairs at the Consumer Brands Association, an industry group that includes Coca-Cola, PepsiCo and General Mills, defended the industry’s practices to NBC News.
“Countering misleading attacks on the industry, he cited the San Francisco Fed’s inflation report released in May, saying that the aggregate price increases over the past three years are not unusual compared to past economic recoveries.”
“The industry remains focused on providing consumers with the best products at the most competitive prices,” she said in a statement.
The letter from Warren and Dean also lists the average price companies have charged for an ounce of soda or cereal each year since 2018, and how much higher federal taxes companies would have paid under the Tax Cuts and Jobs Act of 2017. I was looking for three pieces of information. were not enforced, or whether corporate executives received bonuses or other incentives during times of high inflation.
Dean said the letter was sent to “relieve the unreasonable burden” that businesses place on consumers.
“Even as our economy recovers from the pandemic, people are still suffering from high prices at grocery stores,” Dean said in a statement to NBC News. “Charging more while shrinking the size of products like cereal means Americans are paying more for less, and big corporations are paying less than their fair share of taxes. It means.”
