Hidden price increase! Democratic lawmakers in the United States urge food and beverage giants to stop "shrinkflation" practices

Two Democratic lawmakers in the United States have called on some food and beverage giants to stop the practice of "shrinkflation," which involves reducing product sizes while charging the same or higher prices.

Democratic lawmakers Elizabeth Warren and Madeleine Dean sharply criticized General Mills, Coca Cola, and PepsiCo in a letter, accusing them of profiteering through shrinkflation and tax avoidance to increase company profits.

The letter cited an example of General Mills reducing the size of cereal boxes in 2021, "including reducing the 'family size' Cocoa Puffs from 19.3 ounces to 18.1 ounces without changing the price. Subsequently, General Mills raised prices five times from mid-2021 to mid-2022. In 2023, the President of General Mills North America Retail boasted that the company had become 'smarter' in 'pricing scrutiny.'

The lawmakers pointed out in the letter that Coca Cola and PepsiCo also reduced product sizes, with Coca Cola "selling less soda at the same price" and PepsiCo "replacing the 32-ounce Gatorade bottle with a 28-ounce bottle at the same price." The letter emphasized that increasing the price per ounce by reducing product sizes is not innovation, but exploitation.

PepsiCo denied changing bottle sizes for profit, with a company spokesperson telling CNBC that the 28-ounce Gatorade bottle has been around for over a decade, and the change in bottle size is a long-term strategy, not a response to economic conditions. Coca Cola explained that the smaller bottles are intended to provide lower prices for budget-conscious consumers.

In the three letters, the two lawmakers also accused these companies of funding a 2017 Republican-led corporate tax lobbying effort, which was supposed to promote economic growth but actually "encouraged price fraud" because lower corporate taxes meant they would earn more profit for every dollar increase in price.

According to an analysis by the non-profit Tax Policy Center in February, in the five years following the 2017 tax cuts, General Mills, Coca Cola, and PepsiCo paid effective tax rates far lower than many working-class Americans. General Mills paid an average effective tax rate of 14.8% on its $12 billion profit, Coca Cola paid 13.5% federal income tax on its $13.4 billion profit during the same period, and PepsiCo earned $22.4 billion in profits and paid an average effective tax rate of 15% during those years.

Senator Warren said in a statement to NBC News:

"Consumers notice that their Cheerios cereal boxes and Doritos chip bags are getting smaller, but the prices are higher, while the tax rates these big companies pay are lower than the average American. We can't let them cheat prices and avoid taxes like this. It's completely wrong, and we must fight back."

Shrinkflation is not limited to just soda and cereal. MousePrint.org has found that many products such as razors and almond bags have decreased in size but maintained the same price President Biden has repeatedly criticized shrinkflation as a fraudulent practice and urged Congress in the State of the Union address to pass legislation to classify it as unfair or deceptive practices to combat shrinkflation. Even the Cookie Monster lamented on X in March: "I hate shrinkflation! My cookies are getting smaller."

Nailya Ordabayeva, associate professor of marketing at the Questrom School of Business at Boston University, pointed out that during periods of cost-driven inflation, manufacturers are more inclined to increase profits by reducing product sizes rather than raising prices. Compared to reducing product volume, price increases are more likely to provoke strong consumer opposition, so manufacturers tend to choose shrinkflation.

However, when consumers realize they are paying the same price for less product, especially for items they purchase frequently, they feel angry.

Despite consumer dissatisfaction, shrinkflation continues. A report from the Casey office found that compared to January 2019, unit prices of household products such as toilet paper and tissues are 34.9% higher, with 10.3% of the price increase due to manufacturers reducing the size of rolls and packaging. Snacks like Oreo and Doritos have also increased in price by 26.4% since January 2019, with 9.8% of the growth achieved by reducing product quantity.

Sarah Gallo, Senior Vice President of the Consumer Brands Association, defended the practices of major companies. The association is a trade group with members including Coca Cola, PepsiCo, and General Mills. She cited a May inflation report from the San Francisco Fed to counter misleading attacks on the industry, which showed that the total markups over the past three years are not uncommon compared to previous economic recoveries. She emphasized that the industry is focused on providing the best products at the most competitive prices.

Letters from Senators Warren and Dean request companies to provide the average price per ounce of soda or cereal since 2018, the amount of taxes that would have been paid if the 2017 tax cuts had not been implemented, and the bonuses for executives during periods of high inflation.

Dean stated that these letters aim to alleviate the undue burden imposed on consumers by companies. She emphasized that despite the economic recovery from the COVID-19 pandemic, people are still being hurt by high prices at grocery stores. Reducing product sizes while increasing prices is unfair to consumers, and the taxes paid by large companies are lower than their fair share