The shrinking sips: How shrinkflation is hitting popular coffee chains
A customer picks up their usual grande latte and notices the cup feels slightly lighter than usual, or the muffin that accompanies it seems smaller despite the price remaining precisely the same. These subtle changes represent “shrinkflation,” the practice of decreasing product size while keeping the price constant, a phenomenon that allows companies to maintain profit margins while appearing not to raise prices. The term, coined by British economist Pippa Malmgren in 2009, blends “shrink” and “inflation” to describe how businesses respond to rising costs by reducing product quantities rather than openly increasing prices. This trend, typically seen in packaged grocery goods, has been increasingly adopted by major coffee chains, leading to a new kind of “coffee creep” for consumers who may not immediately notice they’re getting less for their money.
Recent groundbreaking research published in a 2024 study titled “Shrinkflation? Quantifying the impact of changes in package size on food inflation” provides the first large-scale empirical evidence of this phenomenon across the entire U.S. packaged food industry. The statistical data and consumer behavior research cited throughout this article draw from this comprehensive empirical study analyzing barcode-level data from approximately 70,000 stores and 60,000 households. The study found that the average size of packaged food products decreased by 7.24% between 2012 and 2021, and when package size is correctly accounted for in inflation calculations, accumulated inflation in packaged food was 3.8%, but drops to -0.1% when product size is removed—a difference of 3.9 percentage points representing the “hidden” inflation consumers experience.
Research shows that consumers are significantly less sensitive to package size changes than to price changes, with demand elasticity for package size being about one-fourth that of price elasticity, and that a package twice as large is accompanied by only a 43% higher package price, meaning consumers pay disproportionately more per unit as packages shrink.
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Rising costs drive coffee industry shrinkflation
Several contributing factors are driving coffee companies to use shrinkflation, particularly rising operational costs, including labor, rent, and utilities, which have accelerated following pandemic disruptions and subsequent inflation. Food inflation in 2022 registered a 9.9% annual rate in the United States, compared to 7% for all items in the economy. Coffee bean prices have experienced volatility due to climate change affecting growing regions, supply chain disruptions, and increased global demand. Meanwhile, the costs of milk, sugar, and other ingredients have similarly risen, creating pressure on profit margins that companies seek to protect through various strategies.
The transition of shrinkflation from retail coffee products to prepared beverages and food items at coffee shops represents an evolution of the practice into service industries. Packaged coffee products like Folgers cans, which have been shrinking from 48 ounces to 40.3 ounces, demonstrated the concept in grocery stores, establishing a precedent that coffee chains have adapted to their own operations. The shift makes shrinkflation harder for consumers to detect because prepared beverages lack the clear size markings that packaged goods display. This allows companies to implement changes with less customer pushback than explicit price increases would generate.
Starbucks
Starbucks’ evolving cup sizes
Starbucks’ cup size evolution demonstrates how naming conventions and size offerings can mask effective price increases through shrinkflation. The chain initially offered “Short” (8oz) and “Tall” (12oz) as their two sizes, with “Tall” representing the large option despite its name suggesting otherwise. The company later introduced “Grande” (16oz) and “Venti” (20oz for hot drinks, 24oz for cold beverages), relegating the Tall to small status while the new sizes commanded premium prices. The “Trenta” (31oz) size for cold beverages further extended the range, yet it made previously adequate sizes seem insufficient.
The shift in naming conventions subtly masks that customers are paying more per ounce as the baseline size creeps upward. The most common example of shrinkflation in the chain’s drink menu is how the Tall (12oz) became the smallest cold beverage size offered at many locations, making the Grande (16oz) the new effective medium, despite its name meaning “large” in Italian. The confusion created by Italian naming, instead of straightforward small/medium/large designations, further obscures these changes. Additionally, the hedonic relationship between price and package size reveals that consumers pay disproportionately more per unit as packages get smaller.
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Dunkin’ Donuts’ downsized delights
Dunkin’s signature donuts have faced numerous customer complaints about visibly smaller sizes, even while the dozen-box remains the exact dimensions. Social media platforms, particularly Reddit, feature discussions where customers share photos comparing current donuts to previous purchases, with many noting significant size reductions. The visual evidence of smaller donuts rattling around in boxes designed for larger products makes the shrinkflation obvious in ways that beverage downsizing isn’t, creating a direct visual comparison that customers cannot ignore.
Customer complaints extend beyond donuts to other menu items, with bagels reported as noticeably smaller and pastries described as having less filling than in previous years. The reduced sizes affect the value proposition that made Dunkin’ attractive compared to premium competitors, leading customers to question whether the lower prices justify increasingly diminished portions. Some customers report that donuts, once substantial, now seem more like donut holes; an exaggeration that captures the frustration with incremental shrinkage that accumulates over time.
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Tim Hortons’ transformation
Tim Hortons has faced reports of smaller TimBits and alleged reductions in the size and quality of their baked goods, particularly following their acquisition by Restaurant Brands International and subsequent rebranding efforts. The chain’s reputation for fresh, high-quality baked goods suffered as the company shifted from in-store baking to centralized production facilities that ship frozen products to locations. This menu simplification can be seen as a form of “skimpflation” by limiting consumer choice and reducing the distinctiveness that once defined the brand.
The changes have been particularly controversial in Canada, where Tim Hortons holds cultural significance beyond its role as a coffee chain. Long-time customers report that products once considered points of pride now taste and look inferior to what the chain previously offered. The simultaneous reduction in quality and size has damaged brand loyalty that took decades to build, demonstrating the risks of shrinkflation when consumers notice the changes and feel betrayed by a once-trusted institution.
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Broader industry trends and research findings
The packaged food industry shows significant heterogeneity across categories, with yogurt experiencing the most considerable shrinkage at -22.5%, followed by packaged meats-deli at -19.0%, and bread and baked goods at -18.3%. Other coffee chains have implemented similar strategies, though with less public attention than the major brands receive. Local and regional chains face the same cost pressures but often lack the brand loyalty that allows larger chains to implement changes without immediate customer defection. The rise of “skimpflation” expands beyond simple size reduction to encompass quality deterioration as companies manage costs through multiple mechanisms, including shifts to lower-grade coffee beans or automation through robot baristas.
Interestingly, some categories bucked the shrinkage trend, with ice cream and novelties showing a 15.6% increase in average package size, as did baby food and canned vegetables, each at 15.6%. Pasta increased by 11.5%, packaged milk and modifiers by 11.4%, and frozen vegetables by 9.9%. These exceptions suggest that market dynamics and consumer expectations vary significantly across product categories, with some products actually growing in size during the same period that others shrank substantially.
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The consumer perspective and hidden inflation
Research on consumer awareness of shrinkflation reveals complex dynamics about how people perceive and respond to these changes. Studies show that consumers strongly prefer downsizing to package price increases, and this preference does not diminish over time. The 2024 research provides concrete evidence that the hidden cost to consumers is substantial, representing nearly four percentage points of additional inflation over nine years. The psychological impact creates feelings of deception and frustration once consumers notice the changes, even when companies have technically disclosed the modifications. Research demonstrates that consumers react four times more strongly to a price increase than to an equivalent reduction in package size.
Studies examining unit pricing laws found that product shrinkage accelerated in states without such regulations starting in 2016, compared to states with them, suggesting that easier access to per-unit price information makes shrinkflation less effective as a strategy. Research also shows that product shrinkage is less common among low-income consumers, who are more sensitive to per-unit prices. In 2021, the top income bracket experienced a shrinkage of approximately 30% larger than the bottom bracket (-5.43% vs. -4.18%). Bulk discount retailers actually showed an increase in average package size of 8.33% between 2012 and 2021, while all other outlet types showed product shrinkage. Consumers are increasingly responding by switching to local coffee shops, making coffee at home, or buying bulk items that provide better per-unit pricing.
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Policy implications and market segmentation
The research reveals that smaller packages within a food category shrink significantly over time. In contrast, bulkier packages show no shrinkage except in 2021, suggesting that firms may use package size as a product differentiation strategy. Products one standard deviation above the mean in size actually grew by 2.35% between 2012 and 2020, while smaller products shrank by -5.32%, indicating that companies offer smaller “convenience” sizes that command higher per-unit prices while maintaining larger “value” sizes for price-sensitive consumers. Product turnover plays a significant role, with newly introduced products shrinking much faster than existing ones. By 2021, entrant products had shrunk by 22.33% compared to only 4.31% for continuing products, suggesting companies prefer introducing new, smaller products rather than modifying existing ones to avoid backlash.
Perhaps most intriguingly, product shrinkage in sugary product categories is significantly larger than in non-sugary categories, with sugary products shrinking 2.6 times more between 2012 and 2021 (-14.5% vs. -5.57%). This acceleration began around 2016, coinciding with the rollout of sugar-sweetened beverage taxes in several U.S. cities, suggesting that health policy initiatives may be influencing manufacturers’ package size decisions. While no causal claims can be made, the timing and magnitude suggest that product shrinkage may be responding, at least in part, to recent calls for healthier diets and policy pressures on high-sugar products.
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Conclusion
Shrinkflation represents a growing issue in the coffee industry, affecting both packaged coffee and prepared products at major chains, facing similar cost pressures. The first large-scale empirical study confirms that the average packaged food product decreased by 7.24% between 2012 and 2021, contributing an additional 3.9 percentage points to food inflation. While companies may see shrinkflation as a way to manage costs without the customer resistance that explicit price increases generate, the practice erodes customer trust and loyalty when consumers eventually notice the changes. The less-than-proportional relationship between price and size means that smaller packages result in higher per-unit prices, effectively serving as a hidden price increase that has been more heavily concentrated in food categories representing larger shares of household food expenditure.
The bigger picture suggests that transparency and a focus on actual value may be key for coffee chains to navigate future economic challenges without alienating their customer base. Policy interventions, such as unit pricing laws, show promise in helping consumers make more informed decisions and limiting product shrinkage. Evidence shows that states with mandatory unit pricing experience less downsizing.
From a policy perspective, some forms of shrinkflation may not be entirely negative; product size reductions in unhealthy categories that result in higher per-unit prices may provide incentives similar to those that policies promoting healthier eating pursue. The phenomenon raises important questions about how businesses balance cost management with consumer trust, and how regulators can ensure consumers have the information they need to make optimal purchasing decisions in an era of hidden inflation.
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