Shrinkflation, Slack-filling, and the Real Effects of Inflation

Photo Credit: Getty

The Washington Post’s Laura Reiley recently raised an alarm, with a St. Valentine’s Day theme, on a consumer merchandising trend called “slack-filling.” She noted that the $7.99 heart-shaped box of chocolates you pick up your local grocery store or drugstore looks pretty large on the shelf, but these days might only contain, say, 11 actual candies instead of 15 or 16, with the rest of the box being filled up by a plastic spacing device. This is analogous to so-called shrinkflation, in which companies produce seemingly identical packages of a product but downsize them slightly without announcing it, so that your $4 box of crackers is now contains 14.5 ounces of product instead of 16.

Retail cost-containment strategies like this are often attacked as nefarious plots by big companies to gouge consumers, but that outrage is overplayed. In a world where costs inevitably rise and many consumers are stubbornly focus on top-line prices above all else, it’s simply the least bad strategy for brands to stay competitive. Unless you think Russell Stover and General Mills have a secret method of making the prices of their ingredients magically go down that they refuse to use, there’s going to need to be some adjustment to products over time. If sizes and volume counts don’t move, the prices on the shelf tag will inevitably go up – and people will complain about that even more.

In a retail environment like the modern American supermarket, in which every box shows how many ounces it contains and virtually every store also calculates prices by unit – by quart, gram, or pound – it is trivially easy for consumers who really care to compare real prices. The actual problem of course is inflation itself, which despite many conspiracy theories to the contrary, is a monetary phenomenon rather than an effect created by greedy corporations raising prices to enrich themselves. If the Federal Reserve in the United States continues to print more and more money, those dollars are going to be able to purchase fewer goods and services – it’s an unavoidable relationship. Thousands of years of governments that created their own money have repeatedly discovered this to their chagrin.

When you see higher prices – or larger boxes with less stuff – don’t yell at your local egg farmer or candy retailer; yell at Jerome Powell and the big spenders in Congress.

By the way, we covered this topic in Episode 8 of the Free the Economy podcast. Listen here.