For years, quietly trimming a pack from 200g to 180g while holding the shelf price was one of the few levers a food manufacturer could pull without a bruising retailer negotiation. In 2026, that lever is being dismantled.
A wave of reform – the now-mandatory Food and Grocery Code of Conduct, a new excessive pricing prohibition that took effect on 1 July 2026, and the Federal Government's overhaul of the Retail Grocery Industry (Unit Pricing) Code – is putting pack-size changes under a level of scrutiny Australian brands have never faced. While most of the legal obligations land on supermarkets, the commercial consequences flow straight back up the supply chain.
This article explains what is changing, why "shrinkflation" is about to become very visible to shoppers, and how manufacturers can protect margins without damaging trust.
What Is Shrinkflation – and Why Is It Suddenly a Policy Issue?
Shrinkflation is the practice of reducing a product's size or quantity while keeping its price the same (or raising it). The unit price – cost per 100g, per litre or per item – increases, but because the headline shelf price doesn't move, many shoppers don't notice.
After two years of elevated food inflation, consumer groups and the ACCC's 2024–25 Supermarkets Inquiry put the practice firmly on the political agenda. The ACCC found that shoppers rely heavily on unit pricing to compare value, but that inconsistent units, small fonts and poor online display undermine it – and that shrinkflation exploits exactly that gap.
The 2026 Regulatory Landscape at a Glance
| Reform | Status | Who it binds | What it means for manufacturers |
|---|---|---|---|
| Mandatory Food and Grocery Code | In force (mandatory since April 2025) | Large grocery retailers and wholesalers | Stronger supplier protections – but also more formal, documented negotiations. |
| Excessive pricing prohibition | In force from 1 July 2026 | "Very large retailers" with $30B+ grocery revenue | Retailers must justify prices against cost of supply – and will demand robust cost data from you. |
| Unit Pricing Code overhaul | Reforms progressing via Treasury | Grocery retailers (incl. online) | Expected shrinkflation notices on shelf labels; standardised units; bigger, clearer unit prices. |
| Australian Consumer Law | Ongoing | Everyone | Misleading pack design (e.g. slack fill, "new look" masking a downsize) can still breach the ACL. |
The excessive pricing ban: why your cost data now matters more
Under amendments enforced by the ACCC, very large supermarkets are prohibited from charging prices that are excessive relative to the cost of supply plus a reasonable margin. Penalties are the greater of $10 million, three times the benefit obtained, or 10% of annual turnover. Retailers are required to keep detailed pricing and supply-cost records.
The practical effect for suppliers is simple: every cost-price increase request will be interrogated more forensically than ever before. A retailer that must defend its own margin to the ACCC will expect you to demonstrate, line by line, why your cost to supply has changed.
The Unit Pricing Code: shrinkflation goes on the shelf
Treasury's review of the Unit Pricing Code has focused on three themes:
- Product-size change notifications – temporary, prominent shelf and online notices when a product shrinks and its unit price rises.
- Standardised units of measure – ending situations where similar products are priced per 100g in one place and per kg in another.
- Legibility and placement – minimum font sizes and consistent positioning of unit prices, in-store and online, backed by civil penalties.
When a "Product size reduced – unit price increased" flag appears next to your SKU, the shopper's frustration is directed at the brand on the pack, not the retailer that printed the label.
How Shrinkflation Shows Up in the Numbers
Consider a simple, illustrative example of a 200g snack downsized to 180g at the same shelf price:
| Metric | Before | After | Change |
|---|---|---|---|
| Pack size | 200g | 180g | –10% |
| Shelf price | $4.50 | $4.50 | 0% |
| Unit price | $2.25 / 100g | $2.50 / 100g | +11.1% |
| Ingredient cost per pack | $1.40 | $1.26 | –10% |
| Packaging cost per pack | $0.32 | $0.31 | –3% |
A 10% downsize produces an 11.1% unit-price increase – a larger jump than many shoppers would accept as a straightforward price rise. Note also that packaging and conversion costs don't fall proportionally, so the margin benefit is often smaller than expected once you account for line changeovers, new artwork, new NIP calculations and retailer listing fees.
The Compliance Workload Hidden in a Pack-Size Change
A pack-size change isn't just a marketing decision. Every downsize triggers a cascade of regulatory and operational updates:
- Nutrition Information Panel – per-serve values change if serving sizes are adjusted; servings-per-pack always change.
- Net quantity statements – must comply with the National Trade Measurement Regulations 2009 and appear in the correct position and minimum height.
- Health Star Rating artwork – if the recipe is tweaked at the same time, the HSR may need recalculating.
- Specifications and retailer portals – updated dimensions, weights, GTINs and pallet configurations.
- Costings – revised ingredient, packaging and labour cost per unit.
When this information lives in disconnected spreadsheets, a single pack change can take weeks and introduce errors – the most common being an NIP that still reflects the old serving count.
Smarter Alternatives to Silent Shrinkflation
Shrinkflation isn't illegal, and in some cases a size change is the right commercial decision. But in the new environment, the "silent" version carries real brand risk. Consider these alternatives:
1. Transparent price increases backed by data
With retailers obligated to justify pricing, a well-evidenced cost-price increase is more defensible than ever. Build your case on real recipe-level costing: ingredient movements, packaging, energy, freight and labour.
2. Reformulation without compromise
Strategic ingredient substitution – an alternative oil, a locally sourced flour, a reworked inclusion level – can absorb cost pressure while maintaining size and quality. Every reformulation must, of course, flow through to allergen statements, NIPs and spec sheets.
3. Range architecture
Instead of shrinking the hero SKU, introduce a clearly differentiated smaller pack at a lower price point, or a value multipack. Shoppers choose; trust is preserved.
4. Declare the change
Some brands are getting ahead of mandatory notices by flagging size changes on-pack. It's a small gesture that turns a potential scandal into a story about honesty.
| Strategy | Margin impact | Consumer trust risk | Compliance workload |
|---|---|---|---|
| Silent shrinkflation | Medium | High | Medium |
| Evidence-based price increase | High | Low–Medium | Low |
| Reformulation | Medium | Low (if quality holds) | High |
| New pack architecture | Medium–High | Low | Medium |
| Declared size change | Medium | Low | Medium |
Preparing for Tougher Retailer Negotiations
To succeed under the new regime, manufacturers should be able to answer these questions instantly:
- What is the current, fully loaded cost per unit of every SKU?
- Which ingredients drove the change, and by how much?
- How would a 5%, 10% or 15% increase in a key input flow through to the shelf price?
- What would a reformulated or resized product cost – and what label changes would it require?
If producing those answers takes your team a week of spreadsheet work, you're negotiating at a disadvantage.
What Shoppers Are Telling Brands
Consumer sentiment has shifted markedly since the cost-of-living crisis began. Shoppers have become more price-literate, more likely to compare unit prices, and far more likely to share perceived "rip-offs" on social media. A single viral post comparing an old and new pack can generate national media coverage within hours – and retailers are increasingly sensitive to being associated with it.
At the same time, private label ranges continue to gain share as supermarkets push value messaging. Every time a branded product shrinks while the private label equivalent holds its size, the brand hands the retailer an easy comparison. For mid-tier Australian manufacturers that also produce private label, the reforms cut both ways: retailers will expect the same transparency on their own-brand products that they will be required to display on shelf.
The brands navigating this best tend to share three traits: they understand their true cost-to-serve at SKU level, they can move quickly when costs change, and they communicate changes honestly rather than hoping nobody notices.
A Pack-Change Workflow That Holds Up to Scrutiny
If a size change is the right decision, a disciplined workflow reduces both compliance risk and reputational risk:
- Model the economics – compare the margin outcome of a downsize against a price increase, reformulation and range alternatives.
- Recalculate all regulatory outputs – NIP, servings per pack, net quantity, HSR and any nutrition or content claims.
- Review pack design – ensure the new pack doesn't create a misleading impression of size (avoid excessive slack fill or identical-looking artwork).
- Update specifications and retailer data – dimensions, weights, case and pallet configurations, GTINs where required.
- Prepare the narrative – decide whether to flag the change on pack, and brief retail account managers before shelf notices appear.
- Keep the evidence – document the cost drivers behind the decision in case of retailer or regulator questions.
Frequently Asked Questions
Is shrinkflation illegal in Australia? No. Reducing pack size is legal provided the net quantity is accurately declared and the packaging isn't misleading. However, mandatory shelf notifications are being considered as part of the Unit Pricing Code reforms.
Does the excessive pricing ban apply to manufacturers? The prohibition targets very large retailers. Manufacturers aren't directly bound, but will face increased demands for cost transparency.
Do I need to update my NIP if I only change pack size? Yes – at minimum, servings per package will change, and the net quantity must be updated.
The Bottom Line
The era of quiet downsizing is ending. Transparency – on shelf, in negotiations and in your own cost data – is becoming the price of admission to Australian supermarkets.
Batchbase gives food manufacturers real-time, recipe-level costing alongside automatically updated NIPs, allergen statements and spec sheets, so you can model pack changes, build evidence-based price cases and stay compliant in minutes rather than weeks. Book a demo to see it in action.
References
- ACCC – Supermarkets Inquiry 2024–25
- ACCC – Food and Grocery Code of Conduct
- ACCC – Unit Pricing Code
- The Treasury – Consultations on grocery and unit pricing reform
- National Measurement Institute – Guide to the Average Quantity System