Once again Google fucks it up. Someone at Google decided that the space found in Chrome's other bookmarks needed additional spacing between menu items. Suddenly the number of menu items you could display before scrolling is cut in half. This is yet another pointless and annoying change by Google. I suppose they can't think of anything to improve and they use projects like this as an excuse to explain why they are too busy to offer customer service.
Luckily there is a simple hack to get your compact menu back. For PC users, right click on your Chrome launcher and select properties. At the end of the target field ad one space and then enter: —disable-new-menu-style
Next close Chrome and relaunch it. Your Other Bookmarks should once again be compact without the additional spacing.