econlife - What Will Happen to Restaurant Food? by Elaine Schwartz

Celebrity chefs are different from the rest of us. Their white peaches were from Italy and their pomegranates are Sicilian.

Now though, because the demand for premium produce from upscale restaurants and hotels has evaporated, their suppliers need new buyers. One firm has tried to redeploy the food destined for one restaurant to many retail customers. But it means finding a new home for the 100 tons of fruits and vegetables that go to just one medium-sized eatery in a year. Another purveyor says that the three tons of cheese he sells a week to restaurants and caterers has to go elsewhere.

The problems at the top of the food chain resemble what we all face.

Redeploying Food From Restaurants

The balance in food wholesaling has shifted. Whereas demand from restaurants has plunged, supermarkets want much more.

Production

The difference for the producers has mainly involved packaging. The large meat carcasses that went to cafeterias have to be cut up into smaller portions for supermarkets. They need shrink wrap, smaller trays, and new labels.

Also, we don’t know which came first, the chicken or the egg (sorry, could not resist), but we want much more of both. An egg producer with 25 million hens has been scrambling. Like other suppliers, they have had to redirect orders for food service customers and a cruise line that had gotten eight truckloads of eggs a week. Instead, the supermarkets want all of it.

Similarly, at a rate of 15 million pounds a day, the five-pound bags of fresh vegetables sent to fast food chains like McDonald’s and Taco Bell have been broken down. We are also buying more apples, cherries and pears, perhaps 50 percent more at six million pounds a day.

You can only imagine how that has pressured the trucking industry. Because of the surge in orders from warehouses, limits on driving hours have been suspended for food, medical equipment, and other necessities.

Prices

Meanwhile, prices are rising. Boneless chicken breasts might cost us 30 percent more. Beef prices had a 65 percent spike from March 2 to March 19. At the same time, one producer said egg prices have doubled.

You can see that beef is leading the spike:

Our Bottom Line: Supply and Demand

It’s all classic supply and demand. But the big action is on the demand side. The decrease in demand from restaurants shifted the curve to the left. But, a surge in demand from consumers more than offset the drop. At the same time, supply is adjusting its land, labor, land, capital to its new customers.

On a graph, you can see why prices are up. Even with restaurant demand way down, the net impact is an increase on the demand side:

At home, hopefully, many of us are enjoying celebrity chef food.

My resources and more: Sorry to keep referring to gated WSJ articles but they have been pretty good. For food redeployment, I recommend this article. Bloomberg, meanwhile, had the ideal complement.

Ideal for the classroom, econlife.com reflects Elaine Schwartz’s work as a teacher and a writer. As a teacher at the Kent Place School in Summit, NJ, she’s been an Endowed Chair in Economics and chaired the history department. She’s developed curricula, was a featured teacher in the Annenberg/CPB video project “The Economics Classroom,” and has written several books including Econ 101 ½ (Avon Books/Harper Collins). You can get econlife on a daily basis! Head to econlife.

econlife - What Avocados, Salmon, and Butter Have in Common by Elaine Schwartz

During the past seven years, the price of Italian olive oil has doubled. Almost at the same time, we saw salmon cost us 60% more. Butter too is more expensive. As the world’s largest butter exporter, New Zealand has seen demand rise by 50%. Meanwhile, world butter consumption increased by 13% from 2013 to 2018.

You can see the common denominator.

Fat.

Fat used to be bad. Now, not necessarily.

What We Eat

Between 1970 and 2014, we ate more of most food groups. While the numbers in the following graphic are based on availability, the FDA (Food and Drug Administration) concluded that they reflected consumption:

Looking closely at the food groups reveals that some of our tastes have also changed. Mango and broccoli demand have surged while we seem to prefer less of more traditional fruits like oranges, grapefruits, peaches and plums. The constant? The apples, melons, and bananas that we keep buying.

The most significant difference though is more fat. Accelerating the trend is the new conventional wisdom and perhaps research that certain fats are good for us. The result is more demand for olive oil, salmon, almonds, and yes, avocados.

We seem to have moved from butter to margarine and now back to butter again:

Price

An economist at the OECD tells us that worldwide preference for fattier food has gone up faster than anyone expected. The result is classic supply and demand. Prices increased because supply could not keep up:

Our Bottom Line: Regulatory Policy

Meanwhile the FDA has had to respond to our new eating habits. During the next several years we will have more realistic calorie and nutrient labels. Rather than making us feel good with the calories for one serving, food labels will indicate the “supersize” portions we really consume. By eliminating the line with total calories from fat, they will help us distinguish between good and bad fat. Also, the FDA has been reconsidering what “healthy” means.

Starting with the largest food companies, in 2020 and 2021, the new labels will be required.

My sources and more: WSJ had the good overview for the resurgence of fat. Quartz had more on butter. Completing the picture, Vox looked at how our diets have changed. Then, Popular Science had the last step with the regulatory response.

Our featured image is from Pixabay.

Ideal for the classroom, econlife.com reflects Elaine Schwartz’s work as a teacher and a writer. As a teacher at the Kent Place School in Summit, NJ, she’s been an Endowed Chair in Economics and chaired the history department. She’s developed curricula, was a featured teacher in the Annenberg/CPB video project “The Economics Classroom,” and has written several books including Econ 101 ½ (Avon Books/Harper Collins). You can get econlife on a daily basis! Head to econlife.

econlife - Why the Greek Yogurt Invasion Was More Than Yoplait’s War by Elaine Schwartz

People say they don’t really like Greek yogurt. It’s sour and thick while the traditional kind is sweet. But because we think it is a healthier, more authentic alternative, most of us want to like it. And that has been a problem for Yoplait.

Faced with unexpected competition from Chobani and Fage, the Yoplait people decided to create their own Greek yogurt. The names they proposed ranged from Ygefa! (it means health in Greek–they added the punctuation) to Yoganos (made-up but Greek sounding). The final decision was Yoplait Greek.
But it flopped as did all other Yoplait Greek yogurts:

So now they are trying again. Hoping for a healthier, more genuine identity, the plan is to return to Yoplait’s French roots. Their new yogurt is Oui.

Where are we going? To the decline of top food brands.

A Healthy Products History

During the 20th century, as consumers became more affluent, healthier foods became more popular. But the story was very different from today.

One hundred years ago, we wanted factory-made food. With bread for example, home baking took too long and neighborhood bakeries were unsanitary and inconsistent. While people associated local bread with dark and dirty preparation, they imagined glistening equipment in large factories. Considered an innovation in 1928, factory-made sliced bread was said to create a “thrill of pleasure” when housewives saw each perfect slice. Similarly, consumers appreciated the safety, convenience and affordability of foods that were flash frozen, canned and contained preservatives.

Now though, with our quest for healthier foods taking us in the opposite direction, larger firms are losing market share.

Our Bottom Line: Oligopoly

As a large firm that mass produces, has many customers, and few competitors, an oligopoly needs to differentiate its product from everyone else. Traditionally, as we move to the right along the following competitive market structure continuum, the power of the firm accelerates, market entry and exit become more difficult, and price competition is less likely.

But Yoplait tells a somewhat different story. Oligopoly power from old food brands is slipping. Below you can see that the market share of the top 25 U.S. food and beverage companies was down from 66% to 63% between 2012 and 2016:

The reason? We could say that old food brands ranging from Kraft Mac and Cheese to Nestlé’s Nesquik occupy a shrinking middle. The high end consumer is looking for more health and authenticity. Meanwhile, at the low end, house brands are proliferating. In addition, with the internet and social media, smaller firms can cheaply tell their story to a large audience.

So yes, Oui is about much more than yogurt.

My sources and more: Always interesting, NY Times journalist Charles Duhigg told the Yoplait story. Then, soon after, WSJ wrote about the decline of other big food brands as their follow-up to a previous article. Together the three articles illustrate the entire old food brand picture.

Ideal for the classroom, econlife.com reflects Elaine Schwartz's work as a teacher and a writer. As a teacher at the Kent Place School in Summit, NJ, she’s been an Endowed Chair in Economics and chaired the history department. She’s developed curricula, was a featured teacher in the Annenberg/CPB video project “The Economics Classroom,” and has written several books including Econ 101 ½ (Avon Books/Harper Collins). You can get econlife on a daily basis! Head to econlife.