shrinkflation

Shrinkflation hits restaurant diners in Canada

We’ve certainly heard a lot about inflation in the news lately, but how is “shrinkflation” affecting the foodservice industry? According to Sylvain Charlebois, professor at Dalhousie University, shrinkflation is when a food manufacturer reduces the quantities its producing, but sells the product for the same price.

Because this practice is increasing, the Canada Revenue Agency has made some items taxable in smaller amounts, where they were previously taxable only in larger quantities. This means that in some cases, consumers could be hit with an increase from five to 13 per cent, as they pay more, but get less.

What effect will shrinkflation have on the foodservice industry? As a way to combat the continued rising food costs, many restaurants have kept their menus the same, decreasing portion sizes without lowering prices – the restaurants’ version of shrinkflation. Things like smaller burger portions and drinks that are slightly less full are a few ways that restaurants are using this strategy to mask passing their increased costs to the customer while maintaining their margins.

It is not going unnoticed by diners, either. According to a 2022 Yelp survey, comments about smaller portions or reviews with “inflationary language” were up 28 per cent year over year. So, customers are seeing less value for their money at some of their favourite restaurants. And it’s not just happening on menus. Shrinkflation is also affecting some restaurants’ loyalty programs, forcing members to spend more for the same rewards.

With inflation in the news and customers watching their pennies more and more, perceived value is important for customer retention. It’s critical that diners have a positive experience at the restaurant and feel like they got value for their money in order to keep their loyalty and keep them coming back. Restaurants will need to be creative in finding ways to make up for their rising costs and re-evaluate their profit margins, while not appearing to lower the value of the customer experience.