The Truth About “Shrinkflation”

Colin’s Note: Today’s insight comes from Daily Cut editor Kris Sayce…

While the “shrinkflation” buzzword has really only really recently been making headlines… you’ve seen it in action for much longer.

Whether you’re paying more for the same products courtesy of inflation forcing costs higher… or paying the same amount while getting less out of a product thanks to shrinkflation… the result is the same.

Less bang for your buck.

As for who’s really to blame for the war inflation is waging on your wallet, the mainstream press and the politicians would have you think it’s all on the businesses.

But the truth is much more straightforward. More from Kris below…

In general, politicians are dumb.

Arguably, it’s why they go into politics.

They don’t have the skills to succeed in the private sector. So they opt for their only remaining career path.

It’s either politics… or a life of crime.

For some, it’s both.

But if there’s a group of folks who are even dumber than politicians, it is, of course, business journalists.

And, boy, has the Wall Street Journal excelled itself with its complete lack of understanding of inflation.

The Mainstream Haven’t a Clue

Inflation – or its identical twin, “shrinkflation” – only just now seems to have caught the attention of the mainstream.

Somehow or another, the fact that chocolate bars, drinks cans, packaged foods, serving sizes, and more, have fallen in size for decades, has blissfully passed by the mainstream.

Of course, it’s rare for the food company to outright announce the change. Typically, they’ll introduce different sizes to run in parallel to the most well-known size.

They’ll introduce a “mini” or “fun size” or “jumbo” or “extra” version all of the same product. Depending on the uptake of those other products, they’ll determine whether to change the size of the original product.

The pricing of those products will have a direct relationship to the original product. For instance, a “jumbo” version may be 40% larger but costs 45% more to the customer.

The customer may not necessarily notice that. They buy the bigger version because they like the product. It costs more, which means more margin for the company.

And so on.

But here’s the thing. According to politicians and the press, the shrinkflation story is entirely the fault of businesses.

The real fault, as anyone with even a few brain cells knows, is with the politicians and the central bankers… and their program of pro-inflationary policies going back at least 50 years. Arguably, longer.

Because shrinkflation is the twin of price inflation. They are the same thing. Price inflation means increasing the price for the same quantity of goods.

Shrinkflation means maintaining the price but decreasing the quantity. Do businesses try to capitalize on and exploit it? Of course. But businesses are equal victims of inflation due to their higher input costs.

But the politicians will naturally try to divert attention away from the problems they’ve caused and point the fault in the direction of “big bad business.”

And it shouldn’t surprise anyone that businesses are turning against other businesses. In France, the largest supermarket chain, Carrefour has posted big signs next to products to alert customers that the manufacturer has changed the packaging size.

Perhaps they thought it would be a good bit of PR with their customers… encouraging them to buy store-brand goods, rather than premium brands.

But maybe that’s backfired on them. As the Wall Street Journal reports:

On Friday, the French government took steps to require every food retailer in the country to follow suit. By July 1, stores will have to plaster warnings in front of all products that have been reduced in size without a corresponding price cut, in a bid to comeback the consumer scourge known as shrinkflation.

The report goes on to quote French finance minister Bruce Le Maire. He said, “The practice of shrinkflation is a scam. We are putting an end to it.”

Haha.

We guess it takes a scammer to know a scammer.

But nowhere in the story is an explanation of the real causes of inflation. Nothing critical of governments and central banks printing trillions of dollars… wasting trillions on government vanity products… sending hundreds of billions to corrupt foreign regimes…

And allow the constant debasement of the currency so that the value of an individual’s savings and income becomes ever less valuable over time.

Nope. According to the Wall Street Journal (and your elected politicians), it’s all the fault of big business… and so you must trust the government to fix it.

Cheers,

Kris Sayce

Editor, Daily Cut