Shrinkflation Hits UK Supermarkets: What It Means for Shoppers and Investors

Consumers pay more for less as firms protect profits amid inflationary pressures

British consumers are seeing more than just rising prices at the tills — they're getting less for their money, too. A new investigation by Which?, the leading consumer watchdog, has revealed the growing scale of shrinkflation across UK supermarkets, where products are quietly being downsized without corresponding price cuts.

This controversial tactic is being used by major brands to preserve profit margins amid soaring supply chain costs, energy bills, and new government taxes. But what does this mean for shoppers, corporate profits, and share prices?

Shrinkflation Examples: You're Not Imagining It

Which? found that many household staples and treats are being reduced in size, with the following examples particularly standing out:

• Aquafresh Toothpaste: Reduced from 100ml (£1.30) to 75ml (£2.00)
• Gaviscon Liquid: Dropped from 600ml (£14.00) to 500ml at the same price
• Sainsbury's Scottish Oats: Down from 1kg (£1.25) to 500g (£2.10)
• KitKat Two-Finger Multipacks: Shrunk from 21 bars (£3.60) to 18 bars (£5.50)
• Quality Street Tubs: Reduced from 600g (£6.00) to 550g (£7.00)
• Freddo Multipacks: Now 4 bars for £1.40 instead of 5

These changes have often been implemented quietly, with new packaging or “new” product labels disguising the downsizing.

Ingredient Downgrades and Legal Loopholes

Not only are products shrinking, but many are also losing their quality. For instance, white KitKats have reduced cocoa butter content, meaning they no longer legally qualify as white chocolate. Similarly, Penguin and Club bars have had their chocolate status revoked due to increased palm and shea oil content.

These decisions are often made to cut costs amid rising ingredient prices. Nestlé has cited the “significant increase in the cost of coffee,” while Mondelez International claims reducing product sizes is a “last resort”.

Why Is This Happening?

Multiple factors are contributing to the rise of shrinkflation:

• Rising input costs across manufacturing, energy, and logistics
• Increased employer National Insurance contributions
• The UK’s new packaging tax
• Supply chain volatility following Brexit and the Ukraine war

Retailers, facing thin margins, are passing these costs on to consumers — either through price hikes or by shrinking product sizes.

Impact on Company Profits and Share Prices

While consumers are hit hardest, companies using shrinkflation often see improved margins, especially when sales volumes are maintained. This can lead to short-term earnings boosts, pleasing investors and analysts.

Historically, companies like Nestlé and Unilever have been praised by shareholders for using shrinkflation as a means to manage inflation. However, there's a fine line — if consumers perceive these moves as deceptive, brand trust may decline, potentially impacting long-term performance.

In the case of retail-focused investment funds, this trend could help stabilise profits despite softening demand. Expect consumer staples stocks to remain resilient, particularly those with strong brand loyalty and pricing power.

Tips for Consumers: Spotting Shrinkflation

To help consumers identify shrinkflation, Which? advises:

• Be cautious of “new” labels – they might just signal a smaller size
• Always check price per 100g or 100ml – this gives a true comparison between similar products

Final Thoughts: A Win for Investors, a Blow to Consumers?

As the UK battles stubborn inflation, brands are doing all they can to maintain profitability without alienating customers. Shrinkflation allows firms to do just that — but at the cost of transparency.

For investors, the tactic can help underpin profits and support share prices, especially in the consumer goods sector. But if consumer backlash grows or regulators step in, the long-term risks may outweigh the short-term gains.

Sources: (SKYMoney.com, BBC.co.uk)