Shrinkflation—when companies cut the size of their products but keep the price the same—has become increasingly common in recent years. In 2023, Folgers decreased the volume in its coffee containers, Frito-Lay downsized bags of chips, and NutriSource reduced the size of dog-food packages.
Do consumers notice? Apparently not, according to a study of McCormick & Company. The spice giant, which has a 40 percent share of US black-pepper sales, cut the size of almost a dozen related products in the United States in 2015 in response to a 30 percent jump in wholesale pepper prices following a poor harvest.
Ian Meeker of the Federal Trade Commission and Mannheim University PhD student Jakob von Ditfurth built a theoretical model to assess consumers’ attentiveness and applied it to NielsenIQ data from Chicago Booth’s Kilts Center for Marketing corresponding to US consumer purchasing behavior for black pepper before and after 2015.
“We find that almost all consumers fail to notice a change in the net weight,” Meeker and von Ditfurth write. “We also find that consumers are far more sensitive to changes in package prices compared to changes in net weight even when fully attentive.”
Meeker and von Ditfurth started with a simple hypothesis: If people know they’re getting less of something for the same price, they will likely switch to a different product or brand. Using NielsenIQ Retail Scanner Data and NielsenIQ Consumer Panel Data (collected with in-home scanners used to record purchases), the researchers analyzed weekly sales from 35,000 stores in the US. They tracked purchases by as many as 60,000 households between 2014 and 2016.
During that period, McCormick reduced the volume of its Pure Ground Black Pepper from 4 oz. to 3 oz.—initially without even changing the size of the tin. This translated to a 35 cent cost increase for the package, according to the researchers.
Purchasing behavior and market share barely budged. The researchers find no evidence of consumers switching away from the packages that contained less pepper.
After the spice giant McCormick cut the size of many of its pepper products, their average unit prices spiked—more than three times as much as products that didn’t downsize—and yet their market shares remained essentially stable.
Were consumers sticking with downsized McCormick pepper out of brand loyalty? That’s unlikely, Meeker and von Ditfurth say, mainly because black pepper is a generic product. More likely, it was because of sheer inattention, they suggest.
To test this idea, the researchers focused in on stores selling both original and downsized versions at the same time. Analyzing NielsenIQ data from the stores across five weeks, they find that customers ended up buying slightly more of the downsized product than the original—even though they paid the same for less.
Are manufacturers onto a good thing when they subtly downsize their products? Yes and no, Meeker and von Ditfurth say.
Their model suggests that if shoppers were fully aware of the changes, McCormick’s market share would have dropped by as much as 8 percent. In reality, the researchers find that consumers were three times more sensitive to obvious changes in price than quiet changes in size—for a while, at least.
Over time, McCormick consumers started to realize they were being shortchanged. In 2020, the company had to settle a $2.5 million class action suit brought by customers fed up with packages that had “nonfunctional slack-fill,” or empty space.
Manufacturers looking to contain overheads and grow profits face a dilemma, Meeker and von Ditfurth acknowledge. They can shrink their products and hope customers don’t notice, or increase prices and cross their fingers.
The McCormick example might serve as a cautionary tale, they write. Black pepper and other spices have long shelf lives, and consumers mightn’t notice or even care too much about spending 10 percent more on a product they buy rarely. But with fast-moving goods, downsizing becomes a different story. Consumers may be more likely to notice they’re going through candy, chips, and cartons of milk faster than before. And they may start to feel more strongly about it more quickly. With downsizing, it might well be a case of caveat venditor.
Ian Meeker and Jakob von Ditfurth, “Does Peter Piper Pick Pepper Inattentively? Consumer Inattention to Package Content,” Working paper, April 2024.
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