A lot of food companies like Kraft, General Mills, and Tropicana have been trying to get around raising prices by other creative means in the last several years. A common tactic is to change the actual package size so that the consumer gets less but pays the same. Ice cream for example used to be a half gallon portion and is not in many brands any longer, filling a potato chip bag half full of actual chips and half with air is frequent.
As I ate my kiwi this morning though the thought occurred that fruit growers don’t really have that luxury. A kiwi is a kiwi. They can’t shrink the product size, change how much it costs to transport it, or repackage it differently. They can pay their workers less, use more pesticides to keep crop counts high and other things that are “bad” to keep costs low, but changing the actual product portion isn’t really an option.
And this particular kiwi came from New Zealand. It can’t be cheap to ship a bunch of perishables from New Zealand to Ohio. I bought this thing for ~$.33; doesn’t that make the actual product cost of this piece of fruit like a nickel? Shipping this baby, even in mass quantities, has to be like 3X that cost when you take fuel prices into consideration. The profit hardly seems worth the effort of transporting it, storing it, paying import taxes, etc.
I guess I'm just surprised that my kiwi isn’t like $.50/ea by this point. Though I'm glad it’s not.
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6 comments:
To your first point, what companies engage in is called "weight outs" and can be visual (smaller package size, same price) or not visual (less chips in same package, same price). Or the other avenue of a weight out is taking out ingredients to lower the cost. A win here is removing fat because it a) reduces your cost of goods sold, b) makes the product healthier, and c) allows you to upcharge the list price.
Now, to your fruit topic, the way growers can get around that is through 'price transparency'. If I sell kiwis at a price of 9 for $2.75, you are going to have to do some math to conclude the price is about $0.30. If I change that to say 8 for $2.50, I'm now actualy paying about $0.02 more/fruit but unless you have a calculator, you don't really realize it.
1 - air in chips isn't usually air, it's modified atmosphere to keep the air FROM the chips to prevent oxidation. Additionally, it acts as a "cushion" to protect the chips from smashing. So it's not fair to say the air is replacing the chips in value when it is actually protecting them.
2 - fruit and veggie growers can actually pump fruits with extra water. I learned (from my uncle who was the farmer - and no, he didn't do the practice, but heard about it!) that if you over water at CERTAIN times in the growing period, you will result with bigger, heavier, juicier, but much blander/less flavorful fruits. So they can do the same (probably not as easy/likely/possible with, say a banana than with a melon or citrus).
3 - shipping from coast to coast - OR to the Southeast - (I don't know about international rates, like just getting FROM New Zealand, of course) costs us $0.80 per pound! If a kiwi weighs 1 oz (I have no idea), that would be 5 cents per kiwi. Plus, of course, the international freight and any tariffs...Yea, it's amazing when we can get seemingly "cheap" produce from so far away. Makes you wonder how much you could save if you only ate locally and in season (but then you wouldn't get kiwi...).
Oh, and to my 1: that does not meant that recently they have not lowered the weight amount in the same size packaging. I'm just saying that the air pocket is there for multiple reasons.
The cost of most fruits has gone up tremendously, however, I assume that many companies are eating at least some of the cost.
For example, at my cheap produce grocery store, Granny Smith apples were anywhere between $.59 and $.79 a pound before gas prices went higher. Now they're usually between $.99 and $1.39 a pound. That's pretty big percentage wise, but not quite as big a hike as gas prices have gone up.
This is worded retardedly, but you get the idea...
Just goes to show what economies of scale can do for you!
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