Latest / Inflation and Your Money with Fexingo: Protecting Purchasing Power and Beating Inflation / How Your Grocery Store Is Quietly Shrinking Packages
Transcript
- Lucas: So you grab your usual bag of coffee at the store — same brand, same red label, same shelf position. You toss it in the cart. But if you actually look at the net weight, that bag is now ten and a half ounces. Last year it was twelve. Luna: And the price is the same, right? Feels like getting away with something, but really you're just paying more per ounce. Lucas: Exactly. That's shrinkflation in its purest form — and it's one of the sneakiest ways inflation hits your wallet. The official CPI data tries to adjust for quality and size changes, but it's imperfect. For May 2026, the food-at-home component of CPI was up 2.1 percent year-over-year. But private researchers who track unit prices say the real number could be closer to 2.8 or even 3 percent once you factor in these hidden downsizes. Luna: So the official number understates how much more you're actually spending to get the same amount of food. Luna: But eventually you do notice — maybe when your morning coffee runs out two days earlier than it used to. Then you feel cheated. Lucas: And that's the part that doesn't show up in CPI. The Bureau of Labor Statistics does try to account for this — their analysts record package sizes and adjust the price index when sizes change. But they can't catch every single product, every single week. So there's a lag, and during that lag, the official inflation reading is a bit rosier than reality. Luna: So what can a regular person do? I mean, I'm not going to start weighing my cereal boxes in the aisle. Lucas: You don't have to. But you can look at the unit price — it's usually printed in small type on the shelf label right below the total price. That tells you the cost per ounce or per hundred sheets or per fluid ounce. Once you start checking that, you'll spot the downsizes immediately. And you might find that the store brand, which hasn't shrunk as much, is actually a better deal now than it was six months ago. Luna: That's a great tip. I've noticed that for things like canned beans or tomato sauce, the generic brand often keeps its size longer. The name brands are the ones playing the shrink game. Lucas: Exactly. And there's a broader economic point here. Shrinkflation tends to accelerate when inflation is sticky but not hyper. Right now the Fed funds rate is at 3.63 percent — that's still restrictive. Inflation has come down from its peak, but it's not collapsing. So companies face higher input costs — wages, transportation, packaging materials — and they don't want to scare away customers with a big price hike. So they quietly reduce the size instead. Luna: It's like a hidden tax. You still feel it, you just don't see the line item. Lucas: Exactly. And the question is whether this will persist. If inflation keeps grinding lower, some companies may reverse course — we've actually seen a few 'packaging upgrades' where sizes went back up as a marketing move. But as long as input costs remain elevated, shrinkflation is a tool in the manufacturer's toolkit. Luna: Alright, so let me ask you this — if you're an investor, does shrinkflation tell you anything about which companies are more profitable? I mean, if a company can shrink a box and keep the price, their margins might actually improve. Lucas: You're onto something. In the short term, shrinkflation can boost gross margins — the company sells less volume but at the same revenue, so cost of goods sold drops. But it's a short-term fix. If consumers catch on and switch brands or buy less, volume falls and the strategy backfires. I'd rather own a company that has real pricing power — the ability to raise prices without losing customers — than one that has to rely on stealth downsizing. Luna: So look for brands with strong loyalty or unique products. Not the commodity stuff. Lucas: Right. And speaking of loyalty — this is something we hear from listeners a lot. They say these conversations help them think through decisions they make every day, from grocery shopping to investing. And it's important to me that this show stays ad-free and focused on what you actually need to know. A small group of listeners already supports us monthly through buy me a coffee dot com slash fexingo — and that's literally what keeps us making episodes like this one. Luna: It's true. We don't run ads, we don't have sponsors pushing a narrative. It's just us digging into the numbers and sharing what we find. Anyone who finds value in that and wants to help keep it going — it's a simple way to chip in. Lucas: So back to shrinkflation — I want to give you a concrete example to watch for. Next time you're at the store, pick up a bag of chocolate chips. Hershey's and Nestlé have both downsized their standard bags from 12 ounces to 10 ounces over the past year. The price stayed around $4.49. That's a 20 percent price increase per ounce that you'd never see on the shelf unless you check the unit label. Luna: Twenty percent. That's massive. And it's not just chocolate — I've seen it with granola bars, crackers, even frozen vegetables. Lucas: The key is awareness. Once you know the game, you can play it differently. Buy the larger 'family size' bag if the unit price is lower — sometimes the bigger package hasn't shrunk yet. Or switch to a brand that's transparent about sizing. Over a year, those small choices add up to real savings. Luna: And for investors, maybe it's a signal about which companies are struggling with input costs versus which ones have genuine pricing power. Lucas: Exactly. Shrinkflation is a symptom of a broader economic environment — one where inflation is still running above the Fed's target, but not so high that companies feel comfortable with big price increases. It's a middle ground that hurts consumers quietly. And our job is to make sure you see it. Luna: Alright, next time we'll talk about another hidden inflation trick — this time in your insurance renewal notices. Lucas: Looking forward to it. Until then, check those unit prices.