Moneyball: Shrinkflation and Why It Matters

Modern consumerism has devolved into value extraction. Across every industry, quality, service, and choice have all gone down while prices go up. Shrinkflation is no longer a one-off tactic, but instead a permanent strategy ingrained across corporate America. It's not that you outgrew your childhood favorites. It's that they became objectively worse. For the past 15 years, corporations have relentlessly hollowed out their brands and products, quietly reformulating recipes, simplifying ingredients, shrinking portions, and killing off niche items under the endless pursuit of minimizing cost and maximizing profit. And when confronted, they deny or gaslight,

asserting that these changes are upgrades, even though the public can clearly see that they're simply paying more for less. Yet, decades ago, in the 80s, 90s, and 2000s, these same companies were creative and innovative. They dream big, launching new brands, products, and formats to win customers on merit as much as emotion. They took pride in what they invented. Today, all that ambition has been liquidated in favor of ruthless short-term profit engineering. Cost cutting is nothing new, but everything changed in 2011 with the release of Moneyball. The film was more than just an underdog sports story.

What the social network was for nerds, Moneyball was for suits. The movie spread through business schools and headquarters. It elevated efficiency from a back office chore into a corporate mandate, redefined innovation as optimization, and popularized the notion that doing things the way they've always been done is inherently wrong. Success was not about swinging for home runs, but batting singles. Decisions should be made with numbers, not instinct. Like baseball players, brands and products should be treated as just names on a roster. The moment they no longer get on base, they must be replaced by whatever the data deems to be more efficient. Ultimately, winning was presented as a math problem, not a

creative one. Anyone still swinging for the fences was a dinosaur standing in the way of progress. This gospel reached boardrooms, consultants, executives, and Wall Street. No one wanted to be the blind, stubborn scout, much less invest in them. Everyone wanted to be Jonah Hill, Brad Pitt, and the overachieving, lean, datadriven Oakland A's. No industry weaponized this ethos more than consumer goods, who had been long looking for an excuse to trade away the neverending pressure of innovation for the safe, predictable, and clinical science of value extraction. 15 years later, these companies still proudly embrace Moneyball, holding conferences with Billy Bean, talking up data, and

boasting about proprietary algorithms. Even as their products get worse and customers tune out, for them, profit is no longer the reward for a good product. It is the sole objective and only purpose for a product's existence. In this modern MBA episode, we dive into the economics of shrinkflation and how this accelerated in 2011 with Moneyball through the lens of the biggest consumer conglomerates in the world. The Moneyball movie laid out five tenants. The first was that data should be an absolute authority. If the numbers dictate an action, no gut feeling, tradition, or conventional wisdom should stand in its way. If the data says

smaller sizes and higher prices result in higher profit, Moneyball says to do it without any hesitation. The second was scarcity as a catalyst for innovation. Just like how the Oakland A's were forced to innovate as one of baseball's poorest teams, organizations were told to run lean to drive innovation. Scarcity would create urgency, compel teams to do more with less, and those efficiencies in turn would become competitive advantages. The third was to bat singles over home runs. Moneyball taught that success is not about flashy breakthroughs, but about simple, steady, incremental improvements. Every cut cost and margin improvement, no matter how small, are singles that will accumulate over time

into the equivalent of a home run. Let your competitors risk billions trying to catch lightning in a bottle while you string small, consistent, safe wins. The fourth was focus. Organizations should focus exclusively on production, not potential. Any player, product, or brand that underperforms is a liability that drains critical resources away from your star assets. And lastly, Moneyball mandates to challenge the way things have always been done. Conventional wisdom is not to be trusted. The best outcomes are the ones that can be predicted with precision. Numbers strip away subjectivity, provide clarity, and dictate what an organization must do and why. This philosophy has allowed

corporations to rebrand their endless cost cutting and shrinkflation tactics to Wall Street as some high-tech, visionary, and sophisticated competitive advantage. Moneyball resonated deeply with the Hershey company, who was perpetually frustrated with being underdogs in the global candy and snack aisle. The Pennsylvania giant dominates the US market with Reese's, Twizzlers, Jolly Rancher, and Hershey's, but has struggled overseas for generations. In the9s, decades before Moneyball, the company bet everything on innovation. It acquired smaller brands like Milk Duds and Payday, tried to diversify into other categories, and repeatedly launch new products in search of the next great chocolate bar. Cookies and cream,

nuggets, Reese's Sticks, and the Symphony Bar were all invented in this era, and three decades later remained permanent members of the Hershey roster. Executives prided themselves on vision and execution, stating that every brand launched from within the company since 1990 still remained in production. This strategy continued into the 2000s with chocolate slices shaped like Pringles, Reese's Fastreak, candycoated miniature kisses, and Take Five, the first ever candy to combine pretzels, caramel, peanut butter, peanuts, and chocolate into a single bar without going stale or falling apart. Even classics like

Reese's were constantly refreshed with bold flavors like marshmallow, honey roasted, and banana cream. But the only way Hershey's could fit all these products on a retailer's shelves was by making most of these items limited time. There just wasn't enough physical space to carry every single one. This high-intensity innovation model was meant to grab headlines, excite customers, and keep Hershey's ahead of their competition. In the mind of their leaders, a new flavor or new product would be more cost-effective than advertising. At the same time, they were confident in their R&D. Out of dozens of these new products, it was more than likely that one could become that next billiondoll brand. But by 2007, profits

had fallen by 60%. Sales had been growing, but retailers had cut Hershey's shelf space. They were frustrated from constantly having to dump the limited time products at a loss. There were simply too many products and too little shelf space. So much so that the new brands ended up cannibalizing the high margin core brands of Reese's, Hershey's, and Kisses. Margins fell as factories needed to be constantly retoled to support new launches, manufacturing methods, and ingredients. In 2011, at the peak of Moneyball's popularity, the board appointed a new CEO who came in with the pledge that Hershey would hit the top end of all its financial targets under his watch.

Unlike past CEOs who came from marketing or sales, he was a numbers guy. He publicly promised repeatable success through sophisticated statistical models and to put an end to the trial and error spray and prey of the past. Under JP Bilbury, Hershey's turned into a shareholder machine focused exclusively on efficiency and profit. Within a year, he had dismantled the highintensity R&D pipeline, diverted millions of dollars into analytics, and famously asserted that the company had spent too long reading yesterday's news instead of predicting tomorrow's weather, just like the blind old scouts from the movie. He proclaimed Hershey's future as a knowledge company rather than a candy maker. All budgets were funneled

exclusively on three star brands, Reese's, Hershey's, and Kit Kat. Any product not bearing these names was a punitive tax on the company's best assets. Hundreds of products discontinued, dozens of brands divested, factories shuttered, and hundreds of workers got laid off year after year. These cost savings were used to fund record dividends and share buybacks. By 2016, Hershey's had announced that it would only invest in brands that earned their keep. In the CEO's own words, they were no longer going to protect brands simply because of legacy or customer attachment. Innovation slowed as the company focused on batting singles with regular flavor drops and remolded shapes for the three-star brands. Without

innovation, marketing has become the only lever for growth. Advertising costs have doubled as Hershey's has no other way to manufacture demand when the products have stopped evolving and give customers little to be excited about. His successor has taken money ball to the extreme. Under the pursuit of maximum value extraction, the company defines innovation today by pricing and packaging, not product. Products like Reese's Thins are just ways to get customers to pay a higher price per ounce for less product. The conventional lie flat bags have been swapped out for stand-up pouches that look bigger and feel fuller on shelves, but in reality hold less candy than before. The overall lineup remains frozen as a few legacy

brands like Almond Joy, Mounds, and Payday have been kept alive exclusively for the illusion of choice. They're zombies. They get no marketing spend, no R&D budget, and whatever profits they bring in get harvested for shareholders. Modern Hershey's, for all its data and high-tech capabilities, is focused on finding ways to make the product more profitable rather than better. By shrinking the roster down to only profitable brands and applying shrinkflation, Hershey's has been able to squeeze revenue growth of 3 to 5% despite selling less chocolate year after year. The underlying numbers are remarkable. Prices have been jacked up annually on average by 6%. Sales volume has not meaningfully grown in 10 years

when you exclude the pandemic. And yet, Hershey's is still making more money than ever. It's a stark contrast to the 2000s when the company made every effort to keep prices low in exchange for volume. From the outside, Hershey's looks like a success. Executives beam at the Moneyball comparison and boast about shrinkflation as some form of datadriven technological advantage. They brag about their record stock growth while shareholders reap the generous dividends and analysts applaud margins. But look past these numbers and the truth is simple. Fewer and fewer people are actually buying the product. Hershey's today treats its brands as an inelastic product. The harsh truth is that the

company has completely forgotten how to invent. These days, they would rather buy an emerging snack or candy for growth than to create something original like they did regularly in the '90s. 15 years of cost cutting and nickel and dimming have stripped the company of the talent, muscle, and understanding needed to invent something genuinely new that isn't a reboot or extension of an existing product. To sidestep cocoa costs, they've acquired trending brands like Crave Jerky, Barkthins, and Skinny Pop. Under Moneyball Logic, these are undervalued players that have already proven that they can get on base. By plugging them into Hershey's mature distribution and sales machine, the company can safely improve ROI and

bypass the gamble of innovation, even if that means spending millions more postacquisition on celebrity endorsements and mass advertising. Despite its billions and legacy, the company today is content to let others take the swing and then step in only once the home run is hit. In many ways, Hershey's is less of a candy maker and more of a bank. Capital efficient, riskaverse, and focused only on value extraction. Since 2010, the company has spent over $7 billion on dividends alone. A fraction of that could have easily funded multiple products. Every business is asking the same question.

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And once we reach that milestone, we plan to adopt Netswuite. We sit on a mountain of data, but production is so intense that no one has the bandwidth to analyze the business. We're constantly balancing creativity with economics, but it's hard to derive without pulling ourselves away from production. If your revenues are at least in the seven figures, get the business guide, demystifying AI, free at netsweet.com/modernba. The guide is free to you at netswuite.com/modernba. Kelloggs has followed the same trajectory. In the 1990s and 2000s, Kellogg was under siege by private labels, which were aggressively cloning their flagship cereals at half the

price. Kellogg still promised investors growth, dividends, and share buybacks, but believed firmly that product innovation was the engine that would deliver these results. Since they could never win on price, they focused on creating breakthrough products that were so creative and technical that they could never be replicated. They prioritized volume over margin, deliberately kept price increases below inflation, and challenged themselves to find ways to get customers to eat more Kellogg products. Like Hershey, these decades were periods of intense innovation. The Rice Krispy Treat and Ego cereals were feats of food engineering that blew kids' minds around the country. Special K was the first ever cereal with freeze-dried fruit that

wouldn't stain the milk, cereal straws lined with fruit cream, and the magical chocolate- fil center of Crave. As consumers began eating less cereal, Kelloggs tried to adapt with snack bars, granola, pop-tarts, and frozen sandwiches. However, these innovations could not reverse the overall category decline. Kellogg was trapped in a dying market and caught between rising corn costs and falling sales volumes. Profits slipped and the stock stagnated. In 2011, just months after Moneyball, the board appointed an accountant to do what Jonah Hill had done in the movie. A numbers guy rather than a serial man who could detach from legacy thinking, cut ruthlessly, and steady the ship. Just like in Hershey's, this new Moneyball

CEO deemed innovation as wasteful. Products that required multi-step manufacturing and complex R&D, the very moes that Kelloggs had built to fight private label knockoffs were discontinued. Factories were shuttered. Production was consolidated. Workers were laid off and budget was slashed over the course of the next decade. All these cost savings are used to fund dividends and share buybacks and whatever money left over from that got reinvested in a narrow group of high-erforming brands. Kellogg's strategy today is just to squeeze as much profit as possible from shrinking sales through annual price hikes and shrinkflation. They trim the depth of every cereal box while keeping the front the same so customers won't notice

they're paying more for less. Pringles can shrank and the chips themselves got smaller, thinner, and lighter. Rice Krispies, which used to be sold in big sheets, are now mostly sold in tiny, individually wrapped squares. Products that underperform are quickly discontinued, and new releases are generally just repackaged variations or extensions of core brands. Like Hershey, Kellogg has forgotten how to invent. Without that creative muscle or core growth, their only option today is to buy home runs, which they did in 2017 with RXAR for $600 million. Kelloggs has regressed from a category defining giant into a soulless margin machine focused

only on finding ways to charge more and hand out less of the same $50 cornflake. In the9s, there was also General Mills, who ruled school playgrounds and lunchboxes with inventions like fruit roll-ups, dunkaroos, and gushers. The company prided itself on innovation, having transformed yogurt into a portable snack with Go-Gurt, kickstarted the dessert cereal craze with Reese's Puffs, and turned fiber into a daily indulgence with Fiber One. But in 2011, Moneyball had become the dominant religion in corporate America. While Kelloggs, Hershey, and Craft Hines were cutting costs under the guise of becoming leaner, more profitable, high-tech, datadriven companies, General Mills looked like it was stuck in the past. Its pursuit of home runs,

intuition-based decision-making, bloated R&D spend, and prioritization of volume over margin made Wall Street nervous. So, when the company missed earnings in 2014, the response was swift. Under pressure, General Mills executives embraced Moneyball. They stopped trying to invent the next big thing, invested millions into analytics, and tunnel visioned on batting singles. The small group of brands that generated 75% of revenue were rewarded with investment. Everything else got purged. Factories were closed. Workers laid off. Regional brands eliminated. And all these savings were once again recycled into dividends, share buybacks, and extensions of the same core billiondoll brands. Innovation

fell as General Mills went from hundreds of new products a year to just less than 50. Through the decade, legacy brands that defined entire grocery aisles like Progresso, Betty Crocker, and Pillsbury were placed on maintenance mode. Innovation and promotion were no longer permitted and their declining sales were accepted as long as their margins improved. Coupons were also systematically gutted. Under Moneyball, it's better to sell one can of soup at 10 cents a profit than 10 cans at 1 cent each. The company's pride and joy today is not in its products or customer trust, but instead in data science. They boast that their predictive algorithms can calculate the exact scent that a

price can be raised or the ounces of cereal can be shrunk from a box of Honey Nut Cheerios before customers will stop buying. Their latest product is an embodiment of this same approach. It's Yoplate packaged into tiny glass jars, branded in French, and marketed as high-end. And it's been a success at getting customers to pay more for less of the same thing. Today, General Mills has staked its future on pet food for no other reason beyond numbers. It's a higher margin, faster growing category when stacked against cereal, yogurt, and breakfast. And under Moneyball logic, the right decision to make. Like Hershey and Kelloggs before, General Mills has pivoted to buying growth after realizing

that they can't cut their way to it since they don't understand how to get on base in the first place. They can only follow the data, jump on trends after they materialize, and pray that demand lasts long enough for them to recoup their acquisition costs. While Kelloggs and General Mills adopted Moneyball under Wall Street pressure, Craft Hines under the iron grip of its private equity owners pushed Moneyball so far that the company broke. What was once a powerhouse of America's most legendary brands, Hines Ketchup, Philadelphia Cream Cheese, Craft Singles, and Oscar Meyer hot dogs today is a zombie with no soul or purpose. In the9s and 2000s, Craft and Hines were titans of the American pantry. Brand

value was everything. They saw brands as emotional and functional assets that required careful nurturing. While they still promised dividends and earnings to Wall Street, they invested in product superiority and minimized price hikes so Americans would naturally prioritize their brands over private label generics. They created proprietary macaroni noodles for craft mac and cheese, engineered the first ever self-rising frozen pizza for Dioros, pioneered the upside down bottle for easier application of Hines ketchup, and invented shelf stable portable jello- pudding cups. The inflection point came in 2013 when private equity took over.

Inspired by Moneyball, they saw Hines and Craft's sprawling factories, massive R&D campuses, bloated marketing budgets, and hordes of workers as waste. In the context of a spreadsheet, this constant trial and error innovation was completely unnecessary. If nine out of every 10 customers were going to buy craft mac and cheese, why leave millions on the table creating new pasta shapes, launching new brands, and worrying about price hikes? With Moneyball, there was finally a legitimate reason to ignore tradition, push the boundary on price, and optimize for profit. With data and analytics, private equity believed they could unlock efficiencies and achieve returns well beyond the 2% annual growth

and 10% margins the old guard had been content with. By trimming the fat and replacing instinct with algorithms, Moneyball would quickly unlock billions in hidden value. They implemented zerobased budgeting across the whole company, forcing workers to justify every single dollar from scratch under the conviction that this would unearth inefficiencies and underperformers. The only growth that now counted was profitable growth. Innovation shifted away from product and towards packaging and pricing. Market share was irrelevant unless it generated pure profit. Brands, initiatives, factories, and divisions that failed to pass this math test were shuttered. Craft Hines lived by the mantra that it was better to sell

nothing rather than sell for less. Every penny saved was a penny worth earned. Hines ketchup bottles shrank from 20 ounces to 19. Single-use packets went from 10 milliliters to 7 milliliters. To consumers, the difference of a few drops went unnoticed, but to the company, it's 30% more profit. Every box of craft mac and cheese was reduced by 25 g, but the noodles themselves were made thinner and smaller, so the box would still sound full when shaken. Oscar Meyer bacon was repackaged to 12 oz and rebranded as center cut, so the company could sell 25% less meat for the same price as a full pound. Lunchables were reformulated with thinner, cheaper processed meats and cheeses. The cost cutting was so aggressive that the product was

eventually kicked out of the National School Lunch Program for failing to meet the nutritional standards. All these tactics fueled record dividends and profits, which ended up tripling Craft Hind's stock in under four years. But by 2019, Moneyball had hit its wall. The math failed as customers simply walked away. Craft Hind took a $15 billion loss on Craft and Oscar Meyer, admitting that they had harvested all the value and trust that these brands had taken generations to painstakingly accumulate. With no fat left to cut, its leaders have started cutting bone. The company has lurched from trend to trend. Vegan mayo, plant-based burgers, kids flavored water, and pet food. Their leaders don't

have any personal conviction in these futures. Instead, they're just following what the data says. Planters, once a crown jewel of the company portfolio, an undisputed king of the nut aisle, was sold off under the explanation of market pressure and rising costs. But in reality, the company opted for an easy exit because they had forgotten not just how to invent, but also how to compete. To compete requires effort, investment, and talent. The very things that Craft Hines had systematically purged from itself in the name of efficiency. Unilver, PNG, and Nestle have all suffered the same fate. These giants created some of the most iconic products in the 90s and 2000s. Slow churn dryers

that made half-fat ice cream taste like full fat, chocolate wonder balls that hid surprise toys, and gummy crunchy nerds ropes. This creativity extended well into other aisles like Axe Body Spray, single-use Swiffers that replaced messy mops, and Tide Pods that eliminated the hassle of liquid detergent. It's no coincidence that these companies began their pivot in the years following the film's release. While Moneyball might not have been the literal trigger, it popularized and legitimized optimization as innovation. Cost cutting used to be seen as a weapon of last resort for failing companies and desperate leaders. It's an easy lever anyone can pull. Even when performed with algorithms or guided by data, cost

cutting is still cost cutting. It should not be seen as some sophisticated modern high-tech strategy or as a substitute for vision. In the 90s and 2000s, all these corporations, Kelloggs, Hershey's, CraftHines, and General Mills, were under the same pressure for earnings. But their leaders chose to take a long-term holistic view to decisions. Yet today, under Moneyball, the pendulum has swung. Those who optimize for short-term targets, even at the expense of long-term growth, are the ones who rise up the ladder. The result is the corporate monoculture today where executives who see only spreadsheets, not humans, boards that appoint number crunchers over risk-takers and organizations built to achieve

yesterday's targets, yet entirely incapable of inventing the future. When you let the numbers dictate everything, you become reactive and can only see what's in front of you. In baseball, Moneyball works in the regular season, but fails in the playoffs. Similarly, corporations today are buying short-term Wall Street wins, but sacrificing the long-term consumer trust that drove their success in the first place.