Two Democratic lawmakers are asking some of the largest food and beverage companies to stop “shrinkage,” which is shrinking product sizes while charging the same or higher prices.
In a pointed letter, Sen. Elizabeth Warren of Massachusetts and Rep. Madeleine Dean of Pennsylvania accused General Mills, Coca-Cola and PepsiCo of engaging in a “profiteering model” by deflating inflation and “evading taxes.” The letters, sent Sunday afternoon and first shared with NBC News, lay out tactics the companies have employed in recent years to boost profits.
For example, General Mills reduced the sizes of many cereal boxes in 2021, “including reducing ‘Family Size’ Cocoa Puffs from 19.3 ounces to 18.1 ounces while charging the same price,” wrote General Mills chairman and CEO Jeff Harmening wrote in the letter. It added: “General Mills then raised prices five times from mid-2021 to mid-2022, and by 2023, your North American retail group president boasted that the company was ‘getting better and better in how it views pricing. Come smarter’.
Coca-Cola has also reduced the size of its products, selling “fewer sodas at the same price,” the letter to Chairman and Chief Executive James Quincey said. PepsiCo did the same, “replacing 32-ounce Gatorade bottles with 28-ounce bottles for the same price.”
“Reducing product size to gouge consumers on price per ounce is not innovation, it is exploitation,” the letter to PepsiCo President Ramon Laguarta reads.
Spokespeople for General Mills, Coca-Cola and PepsiCo did not immediately respond to requests for comment. PepsiCo denies changing bottle sizes to gain profits; spokesman July told CNBC The 28-fluid-ounce bottle of Gatorade has been around for more than a decade, and selling it more widely is part of the company’s long-term strategy rather than a response to the current economic environment. Coca-Cola explains its smaller bottles Provide a lower price approach Targeted at budget-conscious consumers.
Regardless, Warren and Dean also accuse these companies of funding lobbying Republican-led corporate tax cuts In 2017, it was promised a trickle-down effect but instead “incentivized price gouging” because “companies raise prices to increase profits because they know that lower corporate tax cuts mean they get a cut of every dollar of higher prices. Get more bang for your buck,” all three letters said.
Citing Nonprofit February analysis institute on taxation and economic policyThe letter to General Mills said that in the first five years after the 2017 tax cuts, General Mills paid an average effective tax rate of 14.8% on its $12 billion in profits, a rate lower than many working-class workers. The letter to the CEO said Coca-Cola paid a 13.5% federal income tax rate on its $13.4 billion in profits during the same period, while PepsiCo earned $22.4 billion in profits during those years and had an average effective tax rate of 15%.
“People are noticing that their boxes of cereal and bags of Doritos are smaller and more expensive, while these large corporations pay lower taxes than the average American,” Warren said in a statement to NBC News. “We cannot allow them to gouge prices and evade taxes. This is simply wrong and we are fighting back. “
The decline in consumer goods isn’t limited to soda and cereal. Mouse printing websitea website that tracks retail products, has been highlighting products that have Reduced size but same pricewhich includes a pack of razors, which once contained 36 razors, now down to 30, and a bag of almonds, down from 30 ounces to 25 ounces.
President Joe Biden has repeatedly mentioned shrinking inflation, calling it a “ripoff” in the economy. Videos he posted to X. In this year’s State of the Union address, he urged Congress to pass a The bill will Combat deflation through unfair or deceptive regulation.
Even Cookie Monster has expressed opinions on miniaturized products. Sigh for X March: “I hate shrinkage inflation! My cookies are getting smaller.”
But Nailya Ordabayeva, an associate professor of marketing at Boston University, said that for manufacturers looking to increase profits, especially during inflationary times when the cost of packaging materials and ingredients rises, reducing product size is often seen as a better move than raising prices. Strom School of Business.
“Ultimately the rebound from higher prices is much larger than the lower volume,” she said. “So, between the two evils, layoffs became the first choice.”
That being said, when shoppers notice that they’re spending less money for the same amount of money, especially if it’s something they consume regularly versus an indulgent item they buy once in a while, “that’s when they’ll Feeling uneasy,” Ordabayeva said.
But consumer frustration has not stopped contractionary inflation. one December report An investigation by Casey’s office found that the unit price of household products such as toilet paper and paper towels increased 34.9% from January 2019, with 10.3% of the price increase due to manufacturers reducing the size of rolls and packages. Meanwhile, the price of snacks such as Oreos and Doritos has increased 26.4% since January 2019, with 9.8% of the increase “achieved by providing households with fewer chips and cookies,” the report said. of”.
Sarah Gallo, senior vice president for federal affairs at the Consumer Brands Association, the industry group to which Coca-Cola, PepsiCo and General Mills belong, defended the industry practice to NBC News.
she quoted inflation report A report released in May by the Federal Reserve Bank of San Francisco found that “total markups over the past three years were not unusual compared with previous economic recoveries, countering misleading attacks on the industry.”
“The industry remains committed to delivering the best products to consumers at the most competitive prices,” she said in a statement.
Warren and Dean’s letter asked for three things: the average price the company has charged per ounce of soda or per ounce of cereal each year since 2018, and how much more they would have paid in federal taxes if 2017 prices were used. tax cuts and jobs act It has yet to take effect, as well as whether company executives receive bonuses or other incentives in a time of high inflation.
Dean said the letters were sent out to “reduce the burden of mistakes companies place on consumers.”
“Even as our economy recovers from the pandemic, people are still being hurt by high prices at grocery stores,” Dean said in a statement to NBC News. “Charging more for products like cereal while reducing their sizes, Meaning Americans pay more for less, while big corporations pay less than their fair share in taxes.”
