Smaller Portions and Big Greed Target the Poor

velveeta-shells.png

Despite organizations and policies that work to the contrary, our health in the U.S. is very much connected to our wealth. The more money in our bank account, the easier it is to buy healthier food, afford leisure time for exercise, get proper medical care and education, etc. . . We would hope that Big Food companies who claim to be in “the business of feeding American families” would be cognizant of these economic intricacies and seek to offer healthy options at affordable prices. A recent article in Reuters by Anjali Athavaley explains that the opposite may be true. In response to market trends Big Food companies are selling their junky food in smaller packages at dollar stores. Athavaley uses the example of Kraft’s latest revival of Velveeta as an example:

Kraft found that shoppers on tight budgets at dollar stores were gobbling up Velveeta sauce in the affordable small size, and the food got a new lease on life.”

As any economist will tell you, single serve or small packages are far less cost effective for a consumer than buying in bulk. But, any business owner would tell you that selling items in smaller packages allows for a higher cost per unit volume - a basic explanation of economies of scale. The strategy that Kraft and others have adopted hinges on this principle. By targeting shoppers in dollar stores, they effectively trick consumers into thinking they are getting a better deal, when they actually may be charging a 50% per ounce increase. Athavaley explains:

Shrinking package sizes allows Kraft to reach higher profit margins on products, though it won't sell as many as it would in a larger store. For instance, a 12-ounce package of Velveeta Shells & Cheese cost $2.50 at the a Dollar Tree store in New York City. Meanwhile, a 2.4 ounce cup cost $1.25. That's 21 cents an ounce versus 52 cents an ounce.”

We might just chalk this up to a smart business strategy, but given the target population, Roberto Ferdman of the Washington Post offers this commentary on how ethically questionable their motives are:

So long as the people you're selling to are actively deciding whether or not to stock up at a discount or buy only for the week at a slight mark-up, it's just a value proposition. But it's unclear whether most of the people who shop at dollar stores have that luxury. In fact, it's doubtful.”

In connected news, while consumers with little money may not have the choice to spend more to get a better deal, Fast Food companies may very well have that option. A recent study from the University of Massachusetts Amherst (UMass) found that fast food companies could increase their wages without incurring profit losses, bolstering recent outrage over the low wages that restaurant workers receive. The fast food industry’s response has always contended that increased wages would put them out of business. Ned Resnikoff of Al Jazeera America gives a synopsis of the study’s findings which argue otherwise:

The industry could absorb increased labor costs, the report contends, by reducing turnover and slightly increasing prices. Reducing turnover would theoretically increase the productivity of the employees, therefore reducing the increase in labor costs.”

The question of ethics is thick here once again. Is there justice and equity in a food system that allows for big players to overcharge consumers who have few other options and underpay their workers?

Yet another reason why we continue to look for ways to improve access to healthy and affordable food!

 

Sources: 

Read all articles by Damon Cory-Watson 

Leave a comment

Your email address will not be published
Please check your e-mail for a link to activate your account.
Join Now Become a Member Donate

Most Shared

tag "story" with "home_most_shared"