Menu prices are rising. Is shrinkflation the answer?

Amid skyrocketing overheads and energy costs, hospitality is facing financial pressures from all sides. Operators are at a crossroads, facing the difficult choice between absorbing rising costs, or passing them onto customers through price increases. 

An often talked-about option is ‘shrinkflation’. It’s a controversial, yet increasingly common strategy used to protect margins across industries without raising headline prices. The idea has its roots in retail, but has also been spotted in some UK pubs, bars, and restaurants.

Below, we explore the concept of shrinkflation to ask: is this hospitality’s golden ticket out of an economic crisis, or a surefire way to alienate your customers?

Why are menu prices rising in 2025?

Soaring food prices as well as the higher costs of spirits have sent inventory costs up. At the same time, hiked employer National Insurance contributions and National Living Wage rates have meant that payroll bills (one of the sector’s biggest expenses) are also going up.

In short, it’s becoming more expensive for organisations to both employ staff and produce the food and drink that customers enjoy everyday. And something has to give.

The latest CGA Prestige Foodservice Price Index (FPI) confirms the challenges, showing a sharp 2% month-on-month increase in food and drinks costs in June. Together, these pressures are already driving prices higher across the sector.

The result? Increasingly slim profit margins for operators. Despite rising sales in some areas, many businesses are struggling to stay afloat amid the pressure. The situation is so severe that even big names, such as BrewDog, have been forced to close bars. 

What is shrinkflation?

Shrinkflation refers to pubs, bars, and restaurants reducing portion sizes while keeping the menu price the same. It’s one tactic operators might use to survive inflation without absorbing the costs themselves or raising prices for customers. 

We’re all familiar with the most infamous case of shrinkflation, Cadbury’s Freddos. The chocolate snack has been getting noticeably smaller, making it the nation’s favourite unofficial recession barometer.

In pubs and restaurants, shrinkflation might look like smaller side portions or serving less meat in roast dinners. It can also affect beverages. In April, Oxfordshire pubs came under fire as over half of the drinks served were found to be short pours. An accident, or perhaps a subtle attempt at cost-cutting by shrinkflation.

There are other reasons behind shrinking portions, too. Some pubs are downsizing plates not as a sneaky pricing strategy, but to cut back on food waste. Oddly, some have even linked the issue to the Ozempic craze, arguing that customer appetites are also shrinking.

Navigating price rises in 2025

Operators might be tempted to use shrinkflation as a way to manage rising costs, but is it really a smart move? With price sensitivity still high and many people cutting back on non-essential spending, even small changes can be noticed. 

Slightly smaller portions or cheaper ingredients can be a less jarring adjustment for customers than a direct price hike. Still, it’s not without risks. Eagle-eyed regulars are likely to feel short-changed, leading to backlash that can damage long-term loyalty.

Thankfully, it’s not the only option for struggling businesses. Consider alternative pricing strategies, like smarter menu engineering to highlight higher-margin dishes. You should also try to negotiate better deals with suppliers if you’re struggling with higher menu costs.

Transparency can be a better alternative to cloaked price increases. Openly communicating with customers about the pressures of rising costs can build trust.

It’s worth remembering that short-term gains from shrinkflation may not be worth risking long-term customer relationships. After all, when portions quietly shrink, so can customer trust — and rebuilding that is a cost no SME can afford.