724. What Is Shrinkflation?

Hello everybody, welcome back to another episode of the way the world works. Have you ever maybe gone to the grocery store and picked out your favorite candy bar and thought, what does this seem a little bit smaller than it used to or and this one I think I've noticed the most. You open a bag of like chips or I don't know when eating those like little goldfish crackers, I like those like the individual packs and you open it and you think, I swear they're used

to be more of these inside here. What's going on? Is that ever happened to you? Well you may not be imagining it. This may actually be happening, in fact it is happening and it's something we call shrink inflation.

So you have all probably heard of inflation, of course you have because you've read the creature from Jekyll Island so you understand. So inflation happens, that's a little bit easier for us to see because we see prices sometimes skyrocket, remember what happened to eggs or what has happened to, I think it was chicken during the pandemic. We see these prices skyrocket and if we're seeing it in real time and we think like, oh

my goodness, what is going on here? But shrink inflation is like a little bit trickier because shrink inflation is when the price stays relatively the same but the product keeps shrinking. And it never goes from a hundred to this big overnight, if you're listening to the audio only, I guess you can't see my hands but I went from very big to little. It doesn't happen overnight, right?

All of a sudden you notice, oh my goodness, what has happened? I'm not getting as much of this treat or this snack as I used to have. Or another one is cereal boxes have gotten a little bit smaller. So this is a very real thing and it's called shrink inflation. So how do we know we're not just imagining this, right? Because most people don't bring their candy bar or whatever it is at home and then weigh

it to find out. Well, some people have and that's how we know that this is actually happening. So for example, a Hershey bar, which to me is the least exciting candy bar in the whole world. I always used to get disappointed when I would get those in my trick or treat bag. Because it's just so plain boring.

But anyway, a Hershey bar used to weigh, I think it was two ounces. Now it only weighs 1.55 ounces. So that actually is a pretty big, you know, dramatic decrease, but it's not so big where people are going to automatically notice. OK, so let's talk about Toblerone, which is a much better chocolate bar, if you're asking my personal opinion, but this is not a Brittany compares candy bars episode.

Maybe it should be. Maybe that's another one, but Toblerone in the UK, they added extra gap. So if you've forgotten those are little triangles and you you open it up. It's like a little, it's literally like a little, it's a triangle shaped little tube. And so you open up and you take the chocolate is like cut into triangles. So you take those out.

Well, they put more spaces in between the triangles. OK, so it still it still looks like it's the same, but it's really not cereal boxes. Like like I mentioned, those are slowly cutting back. They're getting fewer. They're selling them with fewer ounces and they used to be ice cream containers are the same height, but they have concaved bottoms, right?

So they're like shrinking the package a little bit. But in ways you can't really see a Gatorade bottles. They redesigned those and they have they have they hold less liquid now. So there's these little things and like with the ice cream one, it's so tricky to me that it's almost impressive because the way they were able to just subtly, slowly start scaling back so that we don't notice.

And it reminds me there's the frog in in boiling water metaphor. And that's if you want to boil a frog, I don't know why you're boiling a frog. I don't know why this is a metaphor that's stuck for people. But if you want to boil a frog, if you were to have the pot of water already boiling and you tried to throw a frog in there, it's going to jump out. It's it's going to be like, Oh, my goodness, this is hot.

No, thank you. Jump out. But if you put it in lukewarm water, lukewarm water and then subtly, slowly over time, turn up the heat until it's boiling. Frog won't know what happened, right? So they think we're the frog.

I also have a lot of questions on again, why people are boiling frogs. And this is not a recommendation to try this at all. Please do not. But in this case, we're the frogs, right? We don't notice until all of a sudden, it's like, wait a second. OK, the price hasn't gone or gone up, but clearly the packaging is tricking

us into into thinking that we're getting the same amount and we're not. And so it's just a trickier way of showing how inflation is still happening, but with shrinkflation. So let's contrast this shrink inflation with what we already know about inflation. And if you have read Tittle Twins and the creature from Jekyll Island, you know a little bit about that.

Remember, grandma and grandpa Tittle talk about how they had saved a certain amount of money for their retirement. And at the time of their retirement, that money was enough to keep them living for the rest of their lives, right? But when the government starts printing money, which they do, then the cost of things, the economy, the market gets messed up, right?

And the money supply gets messed up. So now the amount of things that grandma and grandpa Tittle's retirement bought for them, like how far that money would go, is different now. It buys less today than it did when they first save for it. And that's obviously going to be a huge problem. But let's break that down a little bit more.

So imagine you have $5 and you go to this ice cream shop that you love. And every week you buy a $5 ice cream comb. It's kind of becoming maybe your family's tradition. That's what you do, okay? So one day normal, you know, normal day usually go. You go and all of a sudden the ice cream man is like, Oh, sorry.

No, it's now $6. So we're going to have to have you give me that extra dollar. Now you didn't lose your money. That $5 didn't disappear, but it buys less ice cream than it did before. It won't buy you that full cone because the money supply has been increased, but it was increased faster than the goods that there are to support that.

And I know that that sounds a little tricky. So when the government prints money, everyone now has more dollars. But with more dollars, it's not worth what it used to be worth because everybody has it. And it's kind of it's it's helps to think of it as scarcity, right? When there are fewer things, they're worth more. But when there are more things, they're worth less because they're not as hard to come by.

So we'll because this is about shrinkflation, not inflation. And we've done other episodes on inflation. I want to kind of leave it there and go back to why why on earth companies would then be using shrinkflation. Shrinkflation is kind of tricky because on the one hand, we love the prices stay the same, right? And a lot of consumers are probably going to the store and thinking, you know, with everything else going up with eggs costing for a while there, like $15 if you wanted, like organic.

Why, you know, then we're so thankful that these prices are staying the same. And that is exactly what these companies are banking on, right? Because they're thinking, OK, people are going to notice these decreases in size less than they're going to notice the increase in money. So a $2 candy bar that is still $2 feels a lot less. It's just it feels like a lot, not less, but a lot less burdensome to your wallet. If you're only looking at the price, staying the same and not noticing that the candy bar itself is shrinking a little teeny bit, right?

But it also sends a mixed message to people because people might think, Oh, prices are saying stable, stable. This is great. Like maybe the economy is not as bad as we think it is. But in fact, it is. It's just doing it in a sneaky way because things are slowly getting smaller. And then again, with one company, if one company is doing it, another company is going to do it too, because they're also struggling.

And it's it's competition, which we love. We love good market competition. But when the economy is suffering and it is suffering at the hand of something governments doing that they shouldn't be doing, that gets real frustrating because again, the consumers lose. And we didn't ask anyone to print more money, right? We're not doing that.

That's the government doing it. And you can't again, you can't really blame the companies for that either because they are also trying to survive in a world where the government is messing with the market, which is why it's so important that the government stays out of the marketplace and stays out of messing with the money supply. You know, the market is supposed to work by responding to to to signals. I remember I talked about it in a couple or maybe more than a few episodes ago where these market signals are like these little messages, these little invisible messages, but they're still there. Nonetheless, that that we send that every every action we do sends out into into this, you know, marketplace. So if we are if people start choosing one brand over another, maybe that's sending a signal to, okay, what is this brand doing?

The other people aren't that sending a market signal? What people are incentivized to buy? That's sending a market signal. And so there's these little signals that tell the market how to operate when the government gets involved and they start printing money, they're basically ignoring the signals altogether and saying we don't care what the organic true market is showing. We're just going to make up our own rules and good luck trying to trying to figure it out. And the only people who benefit that from that are well, governments and the people who are lucky enough to get government privileges, right?

The these big too big to fail or companies, a lot of times there are banks, a lot of banks during the 2008 housing crisis, they're reaping the benefits of all these, this horrible money meddling, but but we're not, you know, we're seeing smaller chocolate bars or paying more for something. So shrinkflation is, it represents companies trying to survive this horrible government intervention that's become far too normal in a way that is easing the burden on consumers, even though it's not easing the burden, we're still paying for it. So even though it kind of seems like other being sneaky and they are, you kind of can't blame them because it's not, it's not their doing that messed up the economy to begin with. So next time you are at the store and you think maybe that your candy bar has shrunk or your pack of goldfish has shrunk, you might not be imagining things. It might be very real. And when that is happening, let's step back and maybe do some other, do some more investigating to see what's going on in the economy around that time and and maybe even do some research online and see if other people have noticed it too, because sometimes it's, it's very, very real.

Shrinkflation is, is a sneakier way to get around inflation, but overall it's still signaling the same thing to us. And that is that the economy is messed up and it's messed up because the government has gotten involved yet again. We will wrap it up there. As always, don't forget to like and subscribe to the podcast. And until next time I will talk to you later.