Rishika Shahi
Senator Elizabeth Warren and Representative Madeleine Dean are taking a stand against the controversial practice of ‘shrinkflation’—where companies reduce product sizes while maintaining or increasing prices. In a series of letters addressed to executives at General Mills, Coca-Cola, and PepsiCo, the lawmakers have accused these corporations of prioritizing profits over consumer welfare. Their demands come amid rising concerns about inflation and its impact on everyday Americans, highlighting the need for accountability in the food and beverage industry.
Understanding ‘Shrinkflation’
Reducing product portions while maintaining the same or higher costs is a practice known as “shrinkflation,” and two Democratic congressmen are demanding that some of the largest food and beverage firms quit.
Representative Madeleine Dean of Pennsylvania and Senator Elizabeth Warren of Massachusetts charged in scathing letters that General Mills, Coca-Cola, and PepsiCo were “dodging taxes” and participating in a “pattern of profiteering” through shrinkflation. The letters, which were delivered on Sunday afternoon and were initially obtained by NBC News, list strategies the businesses have employed recently to boost their profits.
For instance, in a letter to General Mills Chairman and CEO Jeff Harmening, the company stated that it was cutting the sizes of several cereal boxes in 2021, “including decreasing ‘Family Size’ Cocoa Puffs from 19.3 ounces to 18.1 ounces while charging the same price.”
“Thereafter, General Mills raised prices five times between mid-2021 and mid-2022, and in 2023, your Group President of North American Retail boasted that the business was ‘getting smart about how we look at pricing,'” the statement continued.
According to the letter addressed to Chairman and CEO James Quincey, Coca-Cola has also reduced the size of its products and is “selling less soda for the same price.” Similarly, Gatorade “replaced its 32-oz bottle with a 28-oz bottle for the same price” at PepsiCo.
The Call for Transparency
The letter addressed to PepsiCo CEO Ramon Laguarta stated, “Shrinking the size of a product in order to gouge consumers on the price per ounce is not innovation, it is exploitation.”
Requests for response from PepsiCo, Coca-Cola, and General Mills spokespeople were not immediately answered. PepsiCo has refuted claims that it is changing bottle sizes to increase profits.
A spokesman for the business told CNBC in July that Gatorade’s 28-ounce bottle has been around for more than ten years and that expanding its distribution was a long-term goal, not a reaction to the present state of the market. Coca-Cola has justified its smaller bottles by citing their intention to cater to people on a budget.
Nevertheless, in their three letters, Warren and Dean also charged that the businesses had funded lobbying for Republican-led corporate tax breaks in 2017, which they claimed would have a trickle-down effect but instead “incentivized price gouging” because the companies had “raised prices to pad their profits, knowing that lower corporate tax cuts meant they would get more back on each dollar of price increase.”
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 lower tax rate than many working people pay, according to a letter to the company that cited a February analysis from the nonprofit Institute on Taxation and Economic Policy.
Tax evasion and price gouging
According to the letter addressed to its CEO, Coca-Cola paid 13.5% in federal income taxes on its $13.4 billion in revenues over the same period of time, whereas PepsiCo produced $22.4 billion in profits and paid an average effective tax rate of 15%.
“Consumers have observed that their bag of Doritos and box of Cheerios is getting smaller, but the prices are getting higher—and these massive corporations are paying lower tax rates than the average American,” Warren said in an NBC News statement. “We cannot allow them to continue their tax evasion and price gouging. It’s just wrong, and we’re retaliating.
Consumer goods aren’t only limited to cereal and soda. A website called MousePrint.org, which records retail products, has been highlighting products that have decreased in size but not in price. Examples of such products are a pack of razors that used to contain 36 razors, but now only has 30, and a bag of almonds that used to contain 30 ounces but now only has 25.
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