How Companies Mask Runaway Inflation

Do you feel like you’re running out of pepper more often these days?

Or maybe you recently realized that no, you are not in fact sweating more, the deodorant sticks you’ve been buying for years have simply gotten smaller lately.

Or worst of all, have you noticed that Slim Jims have gotten shorter? 

If any of the above applies, rest assured it is not your imagination, it is simply a symptom of corporate America attempting to hide runaway inflation — you know, that runaway inflation which the Fed has certainly not created by running the printing presses at full tilt for five years.  

Known as “weight out” in the corporate world and “slack fill” in litigation, it’s a simple strategy that’s been readily apparent in bags of potato chips for years and although it can, in some instances, get companies sued, that’s nonetheless preferable to eating the cost of higher input prices.

WSJ has more:

When spice maker McCormick & Co. started shipping 25% less pepper earlier this year in the same packaging at about the same price, it was engaging in an age-old means of getting frugal consumers to pay more for less.

 

 

Consumer-products makers have used similar tactics as a way of pushing through effective price increases for everything from laundry detergent and tissues to yogurt and candy bars. In the food industry, it’s called “weight-out,” or putting less cereal or potato chips into a package. In toilet paper, the term is “de-sheeting,” when the number of tissues in a box or sheets on a toilet-paper roll are reduced.

 

The regulatory term of art for putting less in a package than meets the eye is “nonfunctional slack fill.” That probably isn’t the term that came to mind for anyone who’s ever opened a bag of chips to find barely a handful inside. But with companies squeezed between thrifty shoppers and—in some cases—rising costs, it’s one that could become more familiar.

 

Earlier this year, McCormick reduced the amount of pepper in its signature red-and-white aluminum tins. What once had eight ounces of pepper now has six. A medium container with four ounces has only three, and a two-ounce tin contains 1.5 ounces. The revised volumes were marked in the “net quantity of contents” label as mandated by federal regulation on the front of the tins.

 

Chief Executive Alan Wilson said in January that pepper costs had risen sharply over the past five years and that the company had little room to raise prices any further..

 

But too much extra room can get a manufacturer into trouble.

 

ConAgra Foods Inc.’s Slim Jim was the target of a purported class-action suit filed in February for violating slack-fill rules. Procter & Gamble Co.’s Old Spice and UnileverPLC’s Axe deodorants faced similar complaints in suits filed in September. 

 

(How much deodorant is actually in that stick? Image courtesy of WSJ and Predator)

 

Companies have wide leeway to add more empty space in packaging. Some states, like California, allow for even more “safe harbors” that manufacturers can use to justify bigger packaging, according to Angel Garganta, an attorney at Venable LLP that specializes in false advertising and consumer-protection law.

One way companies deflect blame (if not criticism) is by simply disclosing the actual new weight of the product on the side of containers.

One common-sense safeguard to deflect accusations of deception is to print the correct amount of product on the outside, legal experts say. “Consumers are mistaken, but the critical thing is that they in fact told the truth, said Thomas J. Maronick, a marketing professor at Towson University and former Federal Trade Commission official.

Of course nobody reads the side of their pepper tins, and unless anyone believes consumers are able to feel the difference between eight ounces of ground pepper and six ounces of ground pepper, these types of "weight out" strategies can be executed with very little in the way of pushback from consumers and even if, as is the case for McCormick, competitors decide to litigate, the gains that accrue from employing "slack fill" could easily outstrip the penalties:

Slack-fill violations can result in penalties. Last year, CVS Health Corp. agreed to pay a $225,000 fine in California for excessive packaging of nearly a dozen products under its own brand like Accelerated Wrinkle Repair Moisturizer and Frizz-Defy Hair Serum.

We'll close with what we said earlier today as it seems particularly appropriate here:

While the Fed may continue to claim inflation is non-existent, except for those "few" Americans who can't afford a house and thus have to rent (incidentally, in New York the average rent just hit a record), inflation is all too present for those other Americans who still enjoy occasionally eating beef as opposed to its sawdust-inspired substitute found in various fast-food venues across the US.