Gov't intervenes as 'shrinkflation' leaves sour taste for Korean consumers

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Gov't intervenes as 'shrinkflation' leaves sour taste for Korean consumers

Published: 14 Nov. 2023, 18:27 Updated: 14 Nov. 2023, 18:38

SEO JI-EUN
seo.jieun1@joongang.co.kr

Consumers shop at a large mart in downtown Seoul on Nov. 7. [YONHAP]

The government is clamping down on the prevalent business tactic called "shrinkflation" where companies reduce the size of a product while maintaining its sticker price.

Finance Ministry Choo Kyung-ho said on Tuesday that the ministry and Fair Trade Commission will look into the practice of slashing product weight without notice in cooperation with consumer watch groups.

"Corporations' product downsize without a change in prices is akin to a kind of stealth price increase," the finance minister said on Tuesday after visiting Emart in Yongsan, central Seoul to check prices of key household items.

From gim (dried seaweed) to beers, Korean manufacturers are subtly reducing the sizes of their products without hiking their prices, the tactic known as "shrinkflation" — a combined word of 'shrink' and 'inflation' — where the impact of this strategy on everyday goods has sparked discontent among consumers.

Ms. Yoon, a 52-year-old homemaker living in Gwacheon, Gyeonggi, recently discovered a slight decrease in the quantity of the crispy gim she regularly enjoyed with meals at home.

Despite the same price of 700 won ($0.53) per package, she found that the packaging of the Dongwon F&B's Yangban gim she bought showed a 0.5-gram reduction, from 5 grams to 4.5 grams, in quantity.

"I felt one day it had only about two-thirds of its usual quantity when I opened it," Yoon said. "It used to be thicker and more satisfying in taste, but now it feels lighter and thinner as if the flavor is lacking."

Dongwon F&B argues that such measures were unavoidable due to the increased costs of raw materials.

"If companies reduce the quantity but keep the price the same, consumers will continue to buy, which won't affect the sales volume — so as a consumer, it feels like a betrayal," Yoon said, adding, "Even though I understand the pressures felt by the companies, my quest is to discover products from companies that haven't compromised on quantity and try to adapt my preferences to new options."

Similarly, Haitai Confectionery and Foods, Lotte Chilsung Beverage and Oriental Brewery, have lowered product sizes to cope with rising costs. These changes are observed not only in packaged goods but also in restaurants, such as the recent reduction from the usual 200 grams to 150 grams for a single serving of samgyeopsal (pork belly). When faced with limited options for size reduction, some companies resort to eliminating previously complimentary services — for example, KFC Korea has started charging for butter for 300 won which was once provided free with biscuit purchases.

The tactics falling under the umbrella of shrinkflation is widely employed by companies to minimize consumer backlash, as people tend to overlook weight details over the price tags, meaning organizations can effectively raise prices. Such marketing tactics are criticized as a ploy amid high inflation, while food companies underscore the struggle, pointing to significant increases in the costs of raw materials, logistics and manufacturing amid government pressure to lower prices.

"The food industry has slim profit margins often ranging from 1 to 2 percent," a source from the food industry said. "In the face of high inflation, we cannot help but reduce product quantity or change ingredients as a necessary survival strategy."

Critics point to lax regulations in current consumer protection laws in Korea, which allow companies to reduce product quantity without notifying consumers.

"Consumers are quick to respond when prices go up, but they might not easily notice or be as sensitive when product quantities are reduced," said Lee Eun-hee, a professor from the consumer science department at Inha University. "It's crucial for consumer groups to expand their monitoring such as by regularly examining and openly sharing information about changes in the quantity and ingredients of key products."

Recently, the government has initiated an "Inter-agency Special Price Stability System," focusing on 28 consumer-sensitive agricultural and food items. The expanded list now includes processed foods such as milk, bread and ramyeon (instant noodles). Despite these efforts, skepticism remains about the effectiveness of government interventions in controlling individual item prices.

"While it's essential for the government to make efforts in maintaining price stability, direct interference in the pricing of specific items isn't ideal," said Sung Tae-yoon, an economics professor at Yonsei University. "It's more fitting to rely on the natural flow of the market economy, addressing issues on a larger scale through monetary policies, like adjusting interest rates."

BY SEO JI-EUN, KIM KI-HWAN [seo.jieun1@joongang.co.kr]