Part 4 – Her Pale Countenance Signaled the End
The HorseWoman of Food has an effect on all of us in the subtlest of ways. Have you ever noticed that when you open a box of cereal, it’s only 2/3rd full? Or that bottle of mayonnaise that you used to buy is different in some way, maybe smaller then you remember. These subtle changes are attributed to the wide spectrum of market changes.
Supermarkets are masters at consumer trending and consumer spending habits. More information is gathered on you while you shop then you may realize. The supermarket loyalty program is only the start. Let’s say for example that you are a small but powerful company with products that you intend to sell at a supermarket. First the supermarket will offer you several different places in the store to “merchandise” your products – for a price. Higher trafficked areas are more expensive, as is eye-level shelving. Since you’re a small company, you choose to be a top shelf item. Along with your purchase of shelving space, you also receive a list of that market’s consumer demographics, listing the spending habits of their customers. Luckily, you’ve chosen a market that caters to the type of consumer you want to reach.
Now, you’ve spent a lot of time considering the packaging for your goods, but you may want to re-think it now that you’ve got a market space to fill. Your boxes are in essence advertisements. So, instead of going for the compact packaging, you decide to upsize your boxing to get more attention since you chose a top shelf. Instead of also up-sizing the contents, you leave them the same. In essence, only filling the boxes 2/3rds. This decision doesn’t make shipping the product easier, but you have decided that the alternative of not being noticed is worse.
Now, your products are selling. But, costs have gone up for the product. Outside influences such as the rising cost of corn, wheat, and animal products have forced you to make another decision. Should you raise the price of your product, or make the product a little smaller. More often than not, you’ll decide to keep the price the same but reduce the quantity slightly so you stay competitive in your pricing. The consumers will barely notice the difference. While you’re at it, you’ll revamp the graphics too with the phrase “New and Improved.”
While this scenario is playing itself out in grocery stores all across America, you and I as supermarket shoppers feel betrayed. When I go into a supermarket with my infant son, and buy Brand A of frozen dinners, Brand B of high-end shampoo, Brand C of baby wipes and Brand D of cookies, my spending habits during each purchase forms an advertising visual of who I am and what I like. I suddenly get coupon printouts for chips and hair color kits from the cashier. Their demographic algorithms have decided that since I’ve purchased convenience foods and have a child that I also may be of the age to use hair color and enjoy chips. If I had used my loyalty card that day, I may also have gotten a coupon for cat food, since my patterns reveal that I buy cat food every other week.
Rising food costs or the smaller packaging decisions made by manufacturers are a reflection of the rise in the costs to produce the items. Corn which used to be used as feedstock for animals is now reserved for ethanol production. The increased demand isn’t generating more profit for the corn growers and in fact it’s the opposite. The cost to grow the corn has been raised due to rising water costs and the cost of the corn seed each year. The price that they can sell the corn at is actually lower than it costs to produce it. This effect ripples through the market via the “High-Fructose Corn Syrup Effect.” If you notice how many products use high-fructose corn syrup, then you may realize the scope of this effect. For every rise in the cost of water/seed/fetilizers/etc. the price of corn has to increase to compensate. The prices of corn increases and the prices of products that use corn products also increase. So the chickens that eat corn feedstock are more expensive to feed, and thus the price of chicken goes up as well.
This HorseWoman may be a subtle warrior, but she can be defeated. This may be a hard pill to swallow, but it’s the power that we as consumers have that can change this trend. If the supermarkets are monitoring our every purchase, then that is an intense power over the industry in general if we use our dollars differently. If I simply don’t buy frozen dinners and cookies anymore because they use high-fructose corn syrup or other corn products, then the demand for corn lowers (however minimally). If multitudes of people did that, imagine the changes in the balance of supply and demand.
Stay tuned for the last chapter in this series and we’ll give tips and tricks on how to defend against all four of the HorseWomen and save your well-earned dollars.
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