The government’s favorite number leaves out the one trick the food industry has mastered
Wall Street cheered the July 14th Consumer Price Index report. Headlines: CPI fell 0.4% in June which was the sharpest monthly drop since April 2020, and the annual rate cooled to 3.5% from May’s 4.2%. Energy did the heavy lifting, with gasoline and fuel oil each dropping more than 9% for the month. Core inflation, which strips out food and energy, was flat.
Your shoppers in the Northeast, Mid-Atlantic, and Southeast markets are not feeling the relief. Food-at-home prices rose again in June, the second straight monthly increase, and they’re up close to 3% over the past year. But even that number understates what’s actually happening on the shelf, because the CPI has a blind spot the food industry has learned to exploit for decades: it struggles to fully capture what happens when the package gets smaller instead of the sticker price getting bigger.
The Gap Between “Price” And “Cost”
The Bureau of Labor Statistics does try to adjust for package-size changes when it can identify them. But identifying them consistently, across tens of thousands of items and 75 metro areas, is a different matter and the researchers who’ve gone looking for the gap keep finding one.
A study led by University of Massachusetts Amherst economist Christian Rojas, with co-authors from Penn State and the USDA, tracked packaged food sizes from 2012 to 2019 and found the average package shrank 14.6% adding nearly four percentage points to measured food inflation over that period. The bigger finding, though, was about mechanism: true “shrinkflation,” where an existing product quietly reappears in a smaller box at the same price, turned out to be rare, under 0.5% of products. What’s actually driving the shrinkage is subtler: manufacturers retire the old size and introduce a new, smaller version alongside or instead of it, so there’s no obvious before-and-after for a shopper, a retailer’s scan data, or a government price collector to flag. Rojas’s team also found shrinkage was most common in categories consumers scrutinize least, and in states without unit-pricing requirements; which is most of them.
Separately, research published this year in the INFORMS journal Marketing Science (Aljoscha Janssen of Singapore Management University and Johannes Kasinger of Tilburg University) put a number on the financial effect: prices per volume rose roughly 12% in the year following a downsizing, and downsizing outpaced upsizing more than five-to-one by sales volume. Critically, the study found shoppers don’t just eat the smaller package they actually buy more units to compensate, meaning total household spending climbs even when the sticker price never moved.
The GAO reached a similar conclusion in its own review, finding per-unit price increases on downsized products ranging from 12% for paper towels to 32% for coffee; categories nearly every Northeast household buys weekly, regardless of income tier.
What’s Actually Shrinking
LendingTree’s most recent tracking found roughly a third of the 100 common products it monitors have shrunk since the pandemic, led by paper goods (about 60% of items tracked lost sheet count) and breakfast foods (44%). Kellogg’s family-size Frosted Flakes went from 24 ounces to 21.7 – a 40% jump in per-ounce price. Party-size Reese’s and M&M’s bags have both lost several ounces. Roughly three-quarters of shoppers say they’ve noticed shrinkflation in the past year, and nearly half admit they’ve walked away from a brand over it. I told PBS NewsHour the day the CPI was released that it is misleading for exactly this reason: the price per unit isn’t really dropping, even as headline numbers look better. It’s the same warning I gave shoppers and retailers on Inside Edition three years ago and it’s only gotten worse since.
Why This Matters More In This Region, Right Now
Food Trade News readers know the Northeast runs its own inflation math with higher base grocery costs in metros like Philadelphia, Washington, New York-Newark and Boston, denser competition, and some of the country’s toughest state-level packaging and pricing scrutiny. That’s exactly the environment where shrinkage is easiest to hide and hardest to justify once found. When national CPI data says food-at-home is up “only” 0.2% for the month, but the products getting bought are quietly smaller than they were a year ago, the real cost-of-living increase for a Northeast household is higher than the headline number suggests and it’s landing hardest on exactly the shoppers our industry should be most worried about retaining.
That’s the point I keep coming back to in the K-shaped economy framework: higher-income shoppers barely notice when a cereal box loses a few ounces. Lower- and middle-income households who are the ones already engaged in what I described to Reader’s Digest as “backwards shopping” – taking inventory of what’s already in the house and building meals around it before shopping, rather than shopping first and cooking second. These shoppers notice immediately; because they’re buying by the unit, not the brand. For these shoppers, shrinkage isn’t a rounding error. It’s the fifth force of food inflation showing up in a place the monthly jobs-and-prices coverage never looks.
The Food Trade Takeaway
Retailers and manufacturers serving our region have a choice to make before regulators make it for them. Momentum is building. The Deceptive Downsizing Prohibition Act of 2025, a bill currently pending in Congress, state-level unit-pricing consistency pushes, and simple viral scrutiny (there’s a Reddit community of over 195,000 who is now cataloging shrunk packages with rulers and scales) all point the same direction. Retailers have more leverage here than they may realize, and three moves would put them ahead of the curve rather than reacting to it.
First, make unit pricing impossible to miss and don’t wait for a mandate to do it. Most shelf tags already carry a price-per-ounce or price-per-count figure, but it’s typically small, low-contrast, and easy to skip. That matters more in some parts of this footprint than others: Maryland, New Jersey, New York, Connecticut, Massachusetts, Rhode Island, Vermont, New Hampshire, and D.C. all require unit pricing by law, but Pennsylvania and Delaware — a core of this readership — don’t, and neither do Virginia or West Virginia in the Southeast, where unit pricing remains purely voluntary. Retailers operating in those non-mandate states have the most to gain by getting ahead of it: enlarge the unit price, standardize it across categories, use larger ESLs, and train store teams to point to it during questions. Retailers in the mandate states aren’t off the hook either. Meeting the letter of the law with a tiny, low-contrast number is still compliance theater. Either way, it’s the one number that cuts through package-size games and handing it to shoppers clearly is worth more than the minimum the law requires.
Second, say something when a package changes, don’t wait to get caught. A short shelf-tag callout (“New size: 14 oz, was 16 oz”) or an app notification takes the “gotcha” out of the discovery. Shoppers forgive a straight answer. They don’t forgive finding out from a TikTok or a r/shrinkflation post that a retailer or manufacturer knew and stayed quiet. French retailer Carrefour took this further in 2023, under CEO Alexandre Bompard, when it began flagging shrunk products from Nestlé, PepsiCo, and Unilever with shelf-edge signs calling out the practice by name; a move that put public pressure on suppliers rather than absorbing the blame itself. It’s a more aggressive posture than most U.S. retailers would take, but it’s proof the tactic can be turned back on the manufacturer instead of landing entirely on the store.
Third, and this is the one with the most upside, make a public, standing commitment that private-label sizes and prices move together, transparently, or not at all. Store brands are the one part of the shelf a retailer fully controls, and they’re also where a lot of shoppers are migrating right now because they are watching pennies or lost trust in national brands. A retailer that can credibly say “we don’t shrink our own products without telling you” turns private label from a value play into a trust play and gives shoppers a reason to consolidate more of the basket there.
Do all three and a retailer earns trust with shoppers who are paying closer attention than the CPI gives them credit for. Skip it, and the number worth watching isn’t the monthly BLS release… it’s the rate at which a private-label competitor down the street picks up the shopper who finally noticed.
None of this shows up in the last CPI headlines. The BLS measures what’s on the price tag; it was never built to measure what’s inside the box. The Northeast, Mid-Atlantic, and Southeast with its dense competition and sharper-eyed regulators, is where that gap gets tested first; and where the retailers who close it, rather than hide behind it, will be the ones still standing when the next shopper finally reaches for a ruler to measure the toilet paper sheet size or counts the number of raisins in their cereal.