‘Shrinkflation’ in the Coffee and Tea Worlds
Arabica’s futures price record, set in April 1977, was broken in December of last year. The Wall Street Journal reports that some industry leaders now expect that 2025 prices paid by consumers will reflect the soaring price for such beans. Their reporter, Ryan Dezember, cited Judy Ganes, an analyst who estimates that “consumers are unlikely to quit coffee over higher prices, but such expensive beans are likely to reduce demand.”
Brands selling packaged coffee and tea to consumers have another option to raising prices:
‘shrinkflation’, the practice of reducing product size or quantity while maintaining price. It’s become a prominent pricing strategy, with manufacturers employing various tactics to subtly reduce costs. Since the Covid-19 pandemic, when the tightened economy unleashed inflation, shrinking of packaging
and/or product sizes have been notable across many CPG products.
Shrinkflation practices within coffee and tea include:
• Reducing Product Quantity: Lowering the weight of coffee grounds, or the number of tea bags in a package, while maintaining the same package size to preserve visual consistency.
• Decreasing Fill Levels: Adjusting the fill levels for instant coffee or loose tea, while keeping container sizes unchanged.
• Introducing Smaller Formats: Shifting to single-serve or smaller formats that cost more per ounce or gram than larger counterparts.
To understand this phenomenon better, T&CTJ spoke with Cailyn Mittur, managing director for FTI Consulting’s Retail & Consumer Products practice. She believes that “these changes are often subtle and may go unnoticed by consumers initially. However, those who carefully examine weight or volume labels may feel deceived and switch to private label or generic alternatives. Many frustrated consumers
turn to social media to voice complaints, often sharing comparative photos of old and new packaging to highlight the perceived loss in value.”
Shrinkflation draws criticism for its environmental impact. Mittur notes that the backlash emerges “particularly when packaging sizes remain unchanged despite reduced product quantities.” This creates inefficiencies in the packaging-to-product ratio, contributing to increased waste and undermining sustainability goals. Consumers are quick to notice these discrepancies and often criticize brands for
failing to align with sustainable practices.
Folgers Classic Roast Ground Coffee shrunk in size but increased
in price per ounce.
Image credit: The JM Smucker Co
Innovation or Taking Advantage?
Additionally, coffee and tea producers now face heightened scrutiny due to long-standing perceptions of unfair trade practices. Mittur says that for those companies emphasising fairtrade certifications on
packaging, “shrinkflation can be seen as hypocritical and inconsistent with their social responsibility commitments. Consumers may also suspect broader cost cutting measures that compromise product
quality, such as changes in formulation or ingredient sourcing.”
To address these challenges and mitigate negative perceptions, several tea and coffee companies are investing in innovative packaging technologies. Examples cited by Mittur include:
• Sustainable Materials: Using recyclable coffee pouches, paperboard canisters, or plastic- and aluminum-free pressed coffee pods.
• Packaging Redesigns: Refreshing branding to enhance shelf appeal or update messaging, particularly to emphasise transparency and sustainability.
These are innovations which Mittur thinks are being used not only because they “help companies demonstrate their commitment to environmental responsibility.” It’s also because they provide an opportunity “to address changes openly. Transparency builds consumer trust and allows brands to explain the rationale behind product adjustments while standing out on retail shelves.”
Packaging innovations can also deliver operational advantages. In the area of cost reduction, Mittur at FTI concludes that “using less material and optimising packaging sizes reduces production costs” and shipping weights. As for logistics efficiency, “smaller and lighter packages improve shipping efficiency, lowering overall transportation costs.”
By addressing both environmental and consumer concerns, companies investing in packaging innovation hope that this will combat negative perceptions associated with shrinkflation, rebuild trust, and strengthen brand loyalty.
When asked about shrinkflation within the coffee and tea industries, Matt Schulz, LendingTree’s chief credit analyst, pointed to findings in the most recent LendingTree report. “We did see one example of shrinkflation among coffee products. Folgers Classic Roast Ground Coffee shrunk in size but increased in price per ounce.” The report featured a table titled “Other products that shrunk the most/least.”
Schulz noted that another coffee product – Maxwell House Breakfast Blend Ground Coffee – “saw its price increase, but its size was unchanged.”. Schulz added that he “would be surprised if there weren’t more examples of shrinkflation in the coffee and tea space. Businesses tend to closely watch what other
competitors do, and if it is clear that someone is engaging in shrinkflation, it is highly likely that others are at least considering it.”
Regarding the pricing and packaging choices that business executives can and should be making, Schulz offered these thoughts: “Businesses should be very careful when considering shrinkflation. Everyone hates higher prices, but the only thing they may hate more is being lied to, and that’s really what shrinkflation is. It can be hard to spot, which is partly why it is popular, but once it is discovered, it can leave the buyer really angry. That’s the last thing any business wants.”
Average prices of coffee in different formats per pound in US City Average between 1996 and 2003. Image credit: FRED
As the LendingTree report notes, Folgers shrunk the size from 48 ounces to just over 40 ounces [Classic Roast]. Schulz called that “a really significant drop.” Companies are clearly reducing product sizes rather than increasing the MSRPs. This happened with coffee during at least one previous recession: instead of 16 ounces, grocery store sizes were reduced to about 13 ounces.
Are some now going even lower, perhaps 12 or 10 ounces? This might be occurring in mass market/grocery channels only. It may also be online and ‘on premise’, with, for example, the whole bean/ground coffee purchased in a coffee shop. If ‘shrinkflation’ is occurring in coffee and/or tea products, what impact is this having on packaging machinery sales or equipment? For his part, Schulz believes that “shrinkflation is really quite common and the effects of this are really significant. They don’t just impact the consumer but also the companies providing the product.”
Smaller Packaging, Higher Prices
Jai Kedia, research fellow at the non-profit Cato Institute, has a different perspective about shrinkflation, referring to the US Bureau of Labor Statistics data: he sees occurrences within coffee/ tea products, but to a small extent within the greater context of post-pandemic inflation. “Downsizing of coffee products accounted for a 1.8 percent increase in the price of coffee from December 2019 to March 2024. However, in the same time period, the overall price of coffee increased by 24.2 percent. That is, only 7.5 percent of the overall increase in the price of coffee in this time period can be attributed to downsizing. The vast majority of inflation in coffee prices cannot be attributed to downsizing.”
While shrinkflation presents challenges for consumers and the industry, it has also spurred innovation and adaptation in the coffee and tea markets, with a focus on value-added attributes, functionality, and premiumisation to justify pricing strategies.
Shrinkflation’s impact on coffee packaging sizes comes in different forms. In the 1980s, one pound
(453.6 g) bags of coffee were reduced to 400g, marking an early instance of shrinkflation in the
coffee industry. The traditional three pound (48 ounce) cans of coffee have been downsized. For example, Folgers coffee cans that used to contain 48 ounces now typically contain 40.3 ounces, with some variations weighing 43.5 ounces.
Shrinkflation accounts for approximately 7.5 percent of the total price increase in coffee since December 2019. This allows manufacturers to maintain price points while reducing the amount of product, often going unnoticed by consumers who are more attuned to price changes than package size alterations.
About 7 in 10 consumers reported noticing at least one incident of shrinkflation within the last year, with coffee being among the affected products. The practice has drawn criticism from consumers and public figures, including politicians who have proposed legislation to address the issue.
The YouGov survey carried out in March 2024 found that 27 percent of US respondents aged 45
to 64 stated being likely to stop purchasing some products to combat shrinkflation. Another 23 percent of those aged 30 to 44 were likely to purchase generic products over name brand products for the same reason.
Dr Jordan L LeBel, Concordia University’s professor of food marketing, and 3M National Teaching Fellow said shrinkflation is nothing new. “While the term has only recently entered the shorthand of popular culture, the fact is that product downsizing while holding prices constant is a well-established technique used in many CPG/ food categories from cereals to yogurt to granola bars and just about every other category.” He thinks that consumers may be noticing the practice more because it is increasingly being used by manufacturers and covered by media outlets. “Their sense of observations and shopping literacy are being challenged to notice all the varied instances where shrinkflation is being applied.”
There are so many things to attend to and distractions while grocery shopping and he is quick to remind us that “manufacturers have many tricks to hide or conceal shrinkflation. For the most part, shrinkflation works if/when the consumer doesn’t notice the change.” Typically, downsizing is is done within or below what is known as the ‘just noticeable difference’ (JND), that is the amount of change that is detectable. Depending on the original size, the JND is usually a bit under 10 percent. Thus, a one kilogram bag of coffee can become 907g and the change may not be readily perceived (unless of course consumers put different versions side by side).
LeBel points out that “coffee (much like cacao) has been dealing with significant headwinds (climate impact, reduced yields and exports, supply chain disruptions, etc) and has not been immune to shrinkflation practices.” Sixteen ounce bags became 12 ounces. In some sub categories (eg, premium, super-premium), shrinkflation actually plays off the positive associations to rarity or exclusivity. For example, he said, specialty coffee, like specialty chocolate – with its premium beans, unique packaging/ branding, etc – has seen reductions in product sizes, and yet still manages to get consumers to buy it.” LeBel further noted that “we’re dealing with different customers who may have different price sensitivities). In some cases, a slight decrease in weight may not be readily detected by taste buds, especially as manufacturers are working on different manufacturing techniques (both in coffee and cacao) to extract more flavour from beans.”
LeBel added that “even the coffee pod segment has seen shrinkflation. Many consumers point out a slight weight reduction in their ‘sleeves’ of Nespresso pods. Facebook, Reddit, and other forums are filled with consumers’ observations and comments.” But here, LeBel said we must exercise caution: “these are unverified and anecdotal testimonies and while still eye-opening and useful, don’t always tell the full picture. In most jurisdictions there’s no law or regulation that
imposes transparency practices to inform consumers that their favourite products have been downsized. Thus, we have no way of knowing how widespread the practice is and which specific categories (and sub categories) are most affected.”
US federal lawmakers have begun investigating major food manufacturers such as PepsiCo, General Mills, and Coca-Cola, for shrinkflation tactics. An October 2024 letter sent to corporations by Senator Elizabeth Warren and Representative Madeline Dean basically accused them of downsizing products between 2021 and 2022 – namely cereal and soda– while charging the same price or even hiking prices (as much as five times in the case of General Mills). The letter further called out General Mills’ group president of North American Retail in 2023 for “bragging that the company was ‘getting smart about how we look at pricing’.”
Consumers are becoming increasingly aware of shrinkflation. About 7 in 10 consumers reported noticing at least one incident of shrinkflation within the last year according to the Euromonitor International/National Coffee Association US Coffee Outlook 2024 webinar, which also reported that breakfast foods, including coffee and tea products, had the second highest rate of shrinkflation, with 44 percent of tracked items now sold in smaller portions.
The US coffee market is set for growth in 2025, particularly in coffee shop spending, RTD coffee, and functional coffees (Grocery Gazette UK, 2024 ). The tea market is expected to see a positive year across all categories as consumer confidence returns and innovation drives excitement (CBSNews.com/Inflation-Shrinkflation Skimpflation October 2024). Government regulation may play a role, with proposed legislation like The Shrinkflation Prevention Act aiming to crack down on corporations reducing product size without price reductions (BevIndustry.com July 2024).
LendingTree’s Study
On 30 September 2024, LendingTree published its analysis of nearly 100 products. Coffee, along with snacks, candy, and cleaning products, has been one of the product categories most significantly affected by changing product sizes between January 2019 and October 2023 . Shrinkflation trends in coffee packaging are part of a broader pattern observed across various consumer goods, with about one-third of common consumer products tracked showing reduced sizes or servings since the pandemic.
While shrinkflation in coffee packaging may seem subtle, it represents a shift in how coffee is sold and priced, affecting consumer value and potentially influencing purchasing decisions in the long term.
