From Shrinkflation to Greedflation: How New Inflation Trends are Impacting Your Wallet

From milk and sugar inflation to shrinkflation, greedflation, skimpflation, and more…

We are undoubtedly in the age of ‘○○flation.’ Inflation, meaning price increases, is merging with all sorts of words. For instance, shrinkflation (Shrink+inflation) refers to selling smaller sizes and volumes of a product while maintaining the same price. At the same time, skimpflation (Skimp+inflation) describes a situation where prices rise, but the quality falls below the previous standard. Greedflation (Greed+inflation) suggests that prices rise due to corporate greed. These are just a few examples of such compound words.

The term streamflation (Stream+inflation) has recently emerged as major online video service (OTT) companies have been raising their prices one after another. This proves that price increases are not limited to food items but are also evident in various sectors, including dining out, smartphones, IPTV (Internet TV), and other digital service fees.

Inflation is unwelcome in all countries. It increases household burden with rising expenses, and it can also decrease the price competitiveness of domestic products by raising their prices. It can even devalue the currency. That’s why governments are wary of inflation and are implementing price-stabilization policies.

However, with the recent global long-term price increases, there is a flood of new words related to inflation.

“Where did one hot dog go?” The Oreo cream controversy in Korea is no exception

First, shrinkflation is a term that refers to a corporate strategy of indirectly raising prices by reducing the size and weight of a product while maintaining its price. The snack Oreo, which boasts a tradition of over 100 years, has also been embroiled in this controversy. There are suspicions that the amount of cream in Oreos has decreased.

According to the Wall Street Journal (WSJ) on the 12th (local time), some consumers suspect that the Double Stuf Oreo product, released with more cream than the original Oreo product, contains less cream.

Oreo launched in 1912, is known as the best-selling snack in the world. However, recently, some consumers have specifically pointed out that the cream in the original Oreo product no longer reaches the edges of the cookie. They also claimed that Oreos no longer look similar to the pictures of Oreos filled with cream on the packaging. Some fans share videos on social media showing a small amount of cream when they twist an Oreo.

The manufacturer, Mondelez International Group, has drawn a line on the controversy. The manufacturer claimed that they had tried various strategies to cope with the problem of rising raw material prices, such as cocoa and sugar, over the past few years. Still, they did not resist price increases by making major changes to the product. Dirk Van de Put, the CEO of Mondelez, also emphasized, “If we start playing around with the quality of the product, it’s like shooting ourselves in the foot. Mondelez is always striving to improve Oreo products.”

However, this company has a history. The famous chocolate bar Toblerone, which looks like a triangular sawtooth, also got caught up in the same controversy in 2016. They reduced the weight by increasing the gap between the chocolate teeth and were caught by consumers. The backlash at the time was quite significant.

Korea is no exception to such controversy. A local food company reduced the number of hot dogs in a product from five to four in March this year. They did not lower the price, effectively raising it. This was only recently revealed through the media. In addition, there are criticisms that consumers find it difficult to notice when the weight of various products such as seaweed, canned tuna, dumplings, snacks, and beer decreases and the price increases.

‘Quality’ has changed while volume and price remain the same… It’s even harder to notice

Another form of inflation that consumers are ‘open-eyed victims’ of is skimpflation. This refers to a strategy of using cheaper ingredients to reduce cost burden while keeping the size or volume of a product the same.

Examples include mayonnaise with reduced egg yolk content, spray with reduced olive oil content, and orange juice with reduced orange pulp content. Even consumers who carefully check the price per unit find it difficult to notice. They have to pay the same or even a higher price for a product that is worse than before.

As the main food prices have been rising significantly for two years in a row, consumers’ sighs are getting deeper. The perceived cost of living could be even higher due to various inflation phenomena like this.

According to the National Statistical Portal of the Statistics Bureau, on the 14th, the consumer price index for milk last month was 122.03, up 14.3% from last month. This is the highest level in 14 years and 2 months since August 2009 (20.8%) when there was the impact of the global financial crisis. Milk prices soared by 4.7% in just one month from last month as dairy processing companies started raising prices. The milk price increase rate is as high as 17.4% compared to two years ago.

Major food items such as sugar and ice cream have risen by 17.4% and 15.2%, respectively, compared to a year ago. Compared to October 2021, two years ago, the price of sugar has soared by a whopping 34.5%.

The price of edible oil has only risen by 3.6% compared to a year ago, but it is 47.9% higher compared to two years ago. Flour prices have dropped by 0.2% compared to a year ago, but they are 36.5% higher than two years ago. Prices have fallen slightly recently from an already high level. The cost of ramen also fell by 1.5% compared to a year ago, but it is 10.0% higher than two years ago.

The situation is not much different for five items in the dining out sector. Last month, the price of chicken was only 4.5% higher than a year ago, but it was 15.2% higher compared to two years ago. Hamburgers also rose by 6.8% compared to a year ago and were 19.6% higher than two years ago.

However, the cost of living perceived by consumers is expected to be higher due to shrinkflation, skimpflation, etc. This is because the consumer price index cannot reflect the reduced product volume or decreased quality at the same price.

Flour prices are stable, and performance is good… but voluntary price reductions are rare

The biggest problem is ‘greedflation’, where prices are not lowered despite falling raw material prices and riding on the trend of price increases.

International flour prices, which soared last year due to the Russian-Ukrainian invasion, have recently stabilized. Compared to the average price in May last year, it has fallen by more than 50%.

Despite the decline in flour prices, the food industry, which had previously announced that they would ‘unavoidably’ raise prices, is maintaining a ‘silent’ stance on the price reduction.

Consumers are growing more suspicious. Why aren’t there any food companies lowering their prices when other main food ingredients such as flour, soybeans, palm oil, and corn have significantly fallen from their peaks in May last year? In this context, concerns about greedflation, which points to corporate greed, are growing.

The Korea Consumer Organizations Federation stated on the 10th, “It is suspicious that companies are only filling their profits even in a situation where raw material prices are falling,” and pointed out that “consumer prices should also be adjusted as raw material prices show a clear downward trend.” They explained, “According to the operating performance results analyzed by this federation in the first half of 2023, Nongshim, for example, increased by 204.5%, and Ottogi also increased by 21.7%.” When looking at the operating profit for the first half of this year, Binggrae increased by 160%, and Haitai Confectionery also increased by 75.5%.

It’s not that there are no companies that have lowered their prices. As mentioned, they announced price reductions centered on the ramen industry in June. However, this was under the government’s explicit request for a price reduction. At that time, the situation was that the rise in dining-out prices, which was 1.8 times the overall consumer price increase rate, continued, and there was strong public criticism that the inflation caused by the food industry was the leading cause. Although they lowered the price, the items were limited, so there were criticisms among consumers that it was a ‘show-off price reduction’ under government pressure and for the consumers.

Major countries, including Korea, the United States, and the UK, require products to display weight, number of items, etc., and consumer prices on their packaging. However, they are not obligated to notify when the displayed content changes. It’s not illegal to quietly reduce the amount and not inform about it. Therefore, it has been entirely up to consumers to examine the products carefully.

However, there is a different atmosphere in France and Germany. These governments are preparing laws to make it mandatory to notify changes. In September, the French supermarket Carrefour caused a stir by voluntarily sticking stickers in front of the shelves to inform about products that had reduced their volume without changing the price.

Our government is also considering providing information so that consumers can more easily understand the changes in product ‘unit price.’ It is known that the Fair Trade Commission, the consumer policy supervisory agency, is considering countermeasures to prevent consumer damage related to shrinkflation. This includes providing additional information to make it easier to understand changes in a product’s unit price (g, ℓ per price, etc.). This measure considers the principle that the government does not intervene in prices and that supermarkets are already displaying product unit prices according to the Ministry of Trade, Industry and Energy’s notice (price display implementation guidelines).

By. Jang Yu Jin