Shrinkflation trend grows as companies battle rising costs

People shop for groceries at a supermarket in Seoul, Nov. 7. Yonhap

As the government attempts to stabilize consumer prices by exerting pressure on the food industry, there's an emerging trend where businesses maintain the same prices for their products but reduce their physical size. Consumer groups contend that this strategy effectively acts as a hidden price hike.

Referred to as shrinkflation, a portmanteau of the words shrink and inflation, this term describes cases where companies opt to decrease the quantity of a product while maintaining the previous product's price, to avoid significant consumer pushback against a price increase.

Recently, popular food brands such as CJ Cheiljedang, Pulmuone, Lotte Wellfood, Nongshim, Dongwon F&B and Haitai Confectionary & Foods reduced the amounts of some of their products, without announcing the change to customers beforehand.

For instance, CJ Cheiljedang reduced the amount of its barbecued-flavored frozen food from 280g to 230g. Even though the product is still being sold at 5,600 won ($4.24) per package, the increase in price per gram results in a price increase of 21 percent.

However, such a move is not illegal under the current customer protection act.

Consumer groups are pushing for legislation that requires companies to notify consumers when there is a change in the total amount of a product without a corresponding price change, citing global examples.

In Brazil, packaging must display the original and reduced volumes, as well as the percentage of the volume reduction. France and Germany are reportedly planning to make the notification mandatory when there is a change in the production volume.

The food industry claims that the strategy is a desperate attempt to cope with the situation where related costs – including raw materials, energy and transportation fees – are all rising, yet the government is asking for them to refrain from increasing prices.

The government announced plans to intensify monitoring of industry practices related to shrinkflation. Additionally, it intends to consistently convey consumer burdens and concerns about price increases to the industry, so as to encourage restraint.