Food Shrinkflation

Food Shrinkflation

March 04, 2024

What is Food Shrinkflation and why is it impacting my grocery bill?

The post-pandemic inflation peak has significantly impacted American wallets, particularly in the realm of food prices. Despite a moderation in the pace of price hikes, food spending has surged, marking a historic high in the share of disposable income allocated to food.

Historically High Prices:

According to the USDA, Americans spent over 11% of their disposable income on food in 2022, a rate not seen since 1991. This surge in food spending has left many households grappling with budgetary constraints.

Shrinkflation:

Shrinkflation, a phenomenon where portion and packaging sizes decrease while prices remain unchanged, has become increasingly prevalent. This practice has led to consumers receiving less value for their money, contributing to the strain on budgets.

Causes of Price Hikes:

Food companies have attributed the rising cost of their products to higher wholesale costs for ingredients like sugar and beef. Additionally, the increase in the minimum wage in many states has added to the costs for companies, which they may pass onto consumers.

Sticky Food Prices:

Food price hikes tend to persist, keeping the share of income spent on food elevated for an extended period. This persistence in elevated food prices further exacerbates the strain on household budgets.

Conclusion:

As food prices continue to surge, American households are facing increased financial pressure. The persistence of elevated food prices underscores the need for households to carefully manage their budgets and seek out cost-saving measures to mitigate the impact on their finances.