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Skimpflation: An ‘unfair’ and risky approach to keeping prices low

Consumers see skimpflation – reducing the quality of ingredients due to rising costs – as more unfair than shrinkflation, making it a risky strategy according to recent research.

“Rising costs have led to the emergence of ‘skimpflation’ – reducing the quality of a product or service without changing its price,” wrote Ioannis Evangelidis, whose new research, published in July, shows that consumers “judge decreases in product quality as significantly more unfair than decreases in product size [so-called ‘shrinkflation’] or increases in price”.

At a glance:

• Shrinkflation and skimpflation are both tactics brands are using to keep costs down as ingredients prices rise.
• Food and drink manufacturers face a consumer “penalty” if they skimp on ingredients in order to cut costs, a marketing expert and researcher has warned.
• Communication of changes is key; and most consumers think it’s fair to increase prices in response to cost increases.

Evangelidis, associate professor of marketing at ESADE Business School, Ramon Llull University in Barcelona, Spain, said this “skimpflation penalty” is associated with perceptions that reductions in the quality of ingredients are “less transparent” and “affect more central aspects of the product and consumption experience”.

“[...] I found strong and highly replicable evidence that consumers generally judge quality reductions as more unfair than either size reductions or price increases,” he wrote. “Moreover, consumers were less willing to buy products whose quality had been reduced than products whose size had been reduced or whose price had increased. I refer to this pattern as the skimpflation penalty.”

However, communicating any changes clearly can reduce this penalty or even eliminate it completely if the changes “affect peripheral rather than central attributes” of the product.

Manufacturers’ choice: Skimp or shrink

With ingredient prices rising and consumers looking to save money, the temptation among food and drink manufacturers to skimp or shrink products is higher than ever.

Shrinkflation has been around for some time. Skimpflation is a more recent approach and brands should tread very carefully when considering it, according to Evangelidis.

“If tomatoes, cocoa, olive oil, packaging, labour, or logistics have become more expensive, the immediate question is: How can we protect our margins without scaring consumers away?” he explained in an upcoming article for Harvard Business Review, a draft of which was shared with Ingredients Network.

“From a purely economic perspective, raising prices, decreasing product size, and reducing product quality may feel similar. But, from a psychological perspective, the three practices are very different,” he wrote.

Evangelidis ran 25 experiments with over 30,000 participants from the US and Europe. Participants read about firms facing increased costs across a number of products and services, including chocolate bars, orange juice, olive spread, toilet paper, laundry detergent, and streaming services.

They then learned the company had responded in one of three ways:

Quality reductions involved reductions in key ingredients; less cocoa in chocolate, less olive oil in an olive spread, or lower concentration of orange juice in a drink. In other cases, quality reductions involved general descriptions of the product’s quality or performance.

“The basic pattern of results was highly consistent across studies,” Evangelidis concluded. “Consumers generally judge quality reductions as more unfair than either size reductions or price increases. Size reductions were also judged as more unfair than price increases. In fact, the vast majority of consumers think it’s fair for a firm to raise prices in response to cost increases,” he added.

Reese’s peanut butter cups and the skimpflation backlash

When it came to skimpflation, another reason for the negativity was because “it takes away the original consumption experience”. A smaller pasta sauce – an example of shrinkflation – remains the same pasta sauce, enjoyed by consumers. However, a diluted sauce is altogether different, with quality reduced.

“Consumers do not merely think, ‘I am getting less’. They may think, ‘This is not what I bought’,” he explained.

When habits are built around products and brands – from pasta sauce and coffee to yoghurt and chocolate bars – people consume these with certain expectations. Quietly changing the quality of the ingredients can “violate” what consumers see as this “implicit agreement”. This can lead to negative stories circulating on social media, pressure from retailers and even reputational damage.

In July, Bloomberg reported on the case of Brad Reese: the grandson of the creator of the Reese’s chocolate-peanut-butter cups started posting on social media about changes to the recipe and ingredients that forced him to “spit it out”. Hershey, which owns the brand, is shifting back after its skimp (though this is reportedly a planned change rather than a reaction to the backlash online).

Other examples of skimpflation include supermarkets cutting back on the core protein in ready meals, or a cut in virgin olive oil and sundried tomatoes in pestos. “Skimpflation may just be the biggest consumer grift going — almost no one and nothing is safe. Yet nobody really seems to be winning,” reported Bloomberg.