The other day I was wandering from blog to blog and I stumbled onto an interesting concept: the idea of "food" versus "feed."
It was here, at an unusual blog that covers a range of topics, most of which have nothing to do with the content here at Casual Kitchen. But this blogger's idea of thinking of the food industry's processed, packaged and shelf-stabilized food products as "feed"... I mean, it's a just an excellent metaphor, a really useful lens to think about the kinds of food I want to avoid.
According to this blogger:
"Soda, chips, candy, cookies, crackers, cakes, pastries, frozen meals, microwavable fare and most fast food and chain restaurant gross national products all qualify as FEED...
Food is grown, raised, harvested and processed--and if not consumed while fresh--preserved in as natural and organic a state as possible to keep most of its nutritious and nourishing qualities intact.
Feed is mass produced by a few large multinational corporations using bio-technological innovations to quickly and efficiently manufacture product units ready for global distribution and a near infinite shelf life. Its primary traits are using genetically modified grain products to create a marketable product that is usually adulterated with preservatives and flavor enhancements designed in a laboratory to stimulate the taste buds to fool the human body into thinking it's something good for you."
Former FDA Commissioner David Kessler, author of The End of Overeating, couldn't say it better.
Here at Casual Kitchen, we use the term second-order foods to describe packaged and processed foods-made-from-other-foods. But the word "feed," with its overtones of factory farming, of the literal fattening up of human beings... it's a far more interesting and rhetorically powerful word. And using this word, thinking about food in this way, it helps put extra power and agency back into consumers' hands. After all, we're not barnyard animals. Who wants to eat feed?
Finally, one more quote relevant our many discussions about branding here at Casual Kitchen:
But above all, the primary difference between Food and Feed can be discerned by this: most real food requires little (if any) corporate mass media marketing campaigns to sell product and expand market shares and waistlines alike.
In other words, branding and advertising is a key cue to distinguish food from feed. It's not always the case, but in general, if a food needs to be advertised and marketed to you, you don't want to eat it.
READ NEXT: The Do-Nothing Brand
And: All-Time Best Articles on Branding, Advertising and Consumer Psychology [ARCHIVE]
Showing posts with label second-order foods. Show all posts
Showing posts with label second-order foods. Show all posts
The Economics of Wasteful Foods
1) Cooking time for regular oatmeal: 4-5 minutes.
2) Cooking time for "quick oats" (essentially regular oats cut up into slightly smaller pieces): 2-3 minutes.
3) Cooking time for instant oats, which are pre-flavored, have the texture and consistency of glue and cost as much as 3-4 times per serving as regular oats: 1-2 minutes.
*********************
After reading the information above, can you tell me why, as a society, we manufacture and sell "foods" like instant oats?
They're a textbook example of a second-order food. They cost more--up to 42c per serving, vs. 9-10c for generic oats and 13-14c for branded oats. And, arguably, they taste worse.
Are we really that busy? And is it a good use of society's collective time to save two minutes at the cost of triple the money? (Um, especially when there's a solid chance the average person is likely to waste those minutes many times over by watching TV or obsessively checking email?)
Why do I bring this up? Well, the other day my wife and I were having a deep conversation on the value proposition of various types of oats (hey, the fun never stops here at Casual Kitchen), and the conversation climaxed with yet another of Laura's pithy sayings:
"You know, instant oats are a metaphor for everything that's wrong with our civilization."
I think she might be right. So, I'll ask it again: Why do foods like this exist?
Here's the short answer: they exist because it's a free country. When you live in a free country, you'll find many of the foods on your grocery store shelves aren't all that tasty, healthy or even tolerable. Some of them cost appalling amounts of money and will kill you if eaten to excess. And don't try to tell me you don't have your own horrendously unhealthy food that's your guilty pleasure (mine is Cool Ranch Doritos).
The thing is, these foods don't exist to please you, they exist for the people who buy and sell them.
In a free society, neither you nor the government gets to decide what foods stores can sell. Nobody gets to tell people what they can or cannot buy. If people want to buy Fruit Roll-Ups, chlorinated pre-made mixed salads, Velveeta, Marshmallow Fluff, ranch dressing or mayonnaise, it's their right.
Yep, that brief list of vile foods I just quoted (and listed in order of increasing vileness in a subtle example of my subclinical OCD) is part and parcel of our free society. Hey, freedom ain't always pretty.
Back to oatmeal. Look, if you can get past the taste and texture, regular "old-fashioned" oatmeal is perhaps the easiest and most laughably cheap breakfast out there. I can't stand oatmeal in any form, but I make it nearly every morning for Laura. It keeps her full for hours, costs pennies, and helps manage her above-average cholesterol. Some might even consider it evidence that I'm a halfway decent husband.
But think about it: if the food industry had its wits about it, it should be charging more for regular oats. Call them "unprocessed oats," promote their all-natural taste and texture, tout the health benefits and the high fiber levels--and then charge triple the price. They could make humble oatmeal into yet another aspirational good, and millions of people would happily pay up for it!
I can hear the ad now, with a testimonial spoken by an earnest-looking, blonde, thirty-something actress: "My parents and I ate instant oats, but I think it's worth it for my family--and especially for my kids--to experience the superior taste, quality and health benefits of natural, unprocessed oats."
Sadly, this kind of marketing is also part and parcel of a free society, as are consumers who mindlessly internalize and obey said marketing. And heck, it was so easy to come up with that ad copy that it makes me wonder why I spent all those years working on Wall Street.
But here's the bottom line. Free economic systems, just like free societies, produce both traps and opportunities. Casual Kitchen readers know this. They know, for example, that there are pricing idiosyncrasies ripe for the taking throughout the food industry (a perfect example would be to eat plain oatmeal at pennies a serving while skipping the $5 box of tooth-achingly sweet cereal). CK readers also know that instant oats are just another hilarious example of a second-order food, with extra branding and processing costs that they do not need to pay.
It can surprisingly easy to beat the free-market food industry at its own game, but you have to be awake and aware. You must keep your mind open to creative ideas and solutions, and you must avoid whining and giving your power away to the evil food industry. Remember, freedom means we are empowered to make our own choices.
Let me add a final tangent to this oddly tangent-laden post: by far the vilest breakfast food I've eaten in my life was a big bowl of Čokolino (pronounced Choh coh LEE no) that I tried in Slovenia back in 2008. The taste and texture were indescribable--the best I can say is it tasted like a foamy and slightly rancid protein shake.
Was this yet another free-market food? Another metaphor for the decline of society? Well, no, not exactly. This "food" was a relic from the former Yugoslavia, back when it was under Tito's dictatorship!
I guess Winston Churchill was right when he said democracies produce the worst food, except for all the other forms of government.
Readers, what processed foods really turn your stomach? Would you ban them (warning: trick question) if you had the power to?
Related Posts:
Why Do Products Go On Sale?
Who Really Holds the Power in Our Food Industry?
Survivor Bias: Why "Big Food" Isn't Quite As Evil As You Think It Is
Let Them Eat Cake! Thoughts About Wealth, Power and the Food Industry
How can I support Casual Kitchen?
If you enjoy reading Casual Kitchen, tell a friend and spread the word! You can also support me by purchasing items from Amazon.com
via links on this site, or by linking to me or subscribing to my RSS feed. Finally, you can consider submitting this article, or any other article you particularly enjoyed here, to bookmarking sites like del.icio.us, digg or stumbleupon. Thank you for your support!
2) Cooking time for "quick oats" (essentially regular oats cut up into slightly smaller pieces): 2-3 minutes.
3) Cooking time for instant oats, which are pre-flavored, have the texture and consistency of glue and cost as much as 3-4 times per serving as regular oats: 1-2 minutes.
*********************
After reading the information above, can you tell me why, as a society, we manufacture and sell "foods" like instant oats?
They're a textbook example of a second-order food. They cost more--up to 42c per serving, vs. 9-10c for generic oats and 13-14c for branded oats. And, arguably, they taste worse.
Are we really that busy? And is it a good use of society's collective time to save two minutes at the cost of triple the money? (Um, especially when there's a solid chance the average person is likely to waste those minutes many times over by watching TV or obsessively checking email?)
Why do I bring this up? Well, the other day my wife and I were having a deep conversation on the value proposition of various types of oats (hey, the fun never stops here at Casual Kitchen), and the conversation climaxed with yet another of Laura's pithy sayings:
"You know, instant oats are a metaphor for everything that's wrong with our civilization."
I think she might be right. So, I'll ask it again: Why do foods like this exist?
Here's the short answer: they exist because it's a free country. When you live in a free country, you'll find many of the foods on your grocery store shelves aren't all that tasty, healthy or even tolerable. Some of them cost appalling amounts of money and will kill you if eaten to excess. And don't try to tell me you don't have your own horrendously unhealthy food that's your guilty pleasure (mine is Cool Ranch Doritos).
The thing is, these foods don't exist to please you, they exist for the people who buy and sell them.
In a free society, neither you nor the government gets to decide what foods stores can sell. Nobody gets to tell people what they can or cannot buy. If people want to buy Fruit Roll-Ups, chlorinated pre-made mixed salads, Velveeta, Marshmallow Fluff, ranch dressing or mayonnaise, it's their right.
Yep, that brief list of vile foods I just quoted (and listed in order of increasing vileness in a subtle example of my subclinical OCD) is part and parcel of our free society. Hey, freedom ain't always pretty.
Back to oatmeal. Look, if you can get past the taste and texture, regular "old-fashioned" oatmeal is perhaps the easiest and most laughably cheap breakfast out there. I can't stand oatmeal in any form, but I make it nearly every morning for Laura. It keeps her full for hours, costs pennies, and helps manage her above-average cholesterol. Some might even consider it evidence that I'm a halfway decent husband.
But think about it: if the food industry had its wits about it, it should be charging more for regular oats. Call them "unprocessed oats," promote their all-natural taste and texture, tout the health benefits and the high fiber levels--and then charge triple the price. They could make humble oatmeal into yet another aspirational good, and millions of people would happily pay up for it!
I can hear the ad now, with a testimonial spoken by an earnest-looking, blonde, thirty-something actress: "My parents and I ate instant oats, but I think it's worth it for my family--and especially for my kids--to experience the superior taste, quality and health benefits of natural, unprocessed oats."
Sadly, this kind of marketing is also part and parcel of a free society, as are consumers who mindlessly internalize and obey said marketing. And heck, it was so easy to come up with that ad copy that it makes me wonder why I spent all those years working on Wall Street.
But here's the bottom line. Free economic systems, just like free societies, produce both traps and opportunities. Casual Kitchen readers know this. They know, for example, that there are pricing idiosyncrasies ripe for the taking throughout the food industry (a perfect example would be to eat plain oatmeal at pennies a serving while skipping the $5 box of tooth-achingly sweet cereal). CK readers also know that instant oats are just another hilarious example of a second-order food, with extra branding and processing costs that they do not need to pay.
It can surprisingly easy to beat the free-market food industry at its own game, but you have to be awake and aware. You must keep your mind open to creative ideas and solutions, and you must avoid whining and giving your power away to the evil food industry. Remember, freedom means we are empowered to make our own choices.
Let me add a final tangent to this oddly tangent-laden post: by far the vilest breakfast food I've eaten in my life was a big bowl of Čokolino (pronounced Choh coh LEE no) that I tried in Slovenia back in 2008. The taste and texture were indescribable--the best I can say is it tasted like a foamy and slightly rancid protein shake.
Was this yet another free-market food? Another metaphor for the decline of society? Well, no, not exactly. This "food" was a relic from the former Yugoslavia, back when it was under Tito's dictatorship!
I guess Winston Churchill was right when he said democracies produce the worst food, except for all the other forms of government.
Readers, what processed foods really turn your stomach? Would you ban them (warning: trick question) if you had the power to?
Related Posts:
Why Do Products Go On Sale?
Who Really Holds the Power in Our Food Industry?
Survivor Bias: Why "Big Food" Isn't Quite As Evil As You Think It Is
Let Them Eat Cake! Thoughts About Wealth, Power and the Food Industry
How can I support Casual Kitchen?
If you enjoy reading Casual Kitchen, tell a friend and spread the word! You can also support me by purchasing items from Amazon.com
via links on this site, or by linking to me or subscribing to my RSS feed. Finally, you can consider submitting this article, or any other article you particularly enjoyed here, to bookmarking sites like del.icio.us, digg or stumbleupon. Thank you for your support!
A Reader Asks for Help
I recently received the following comment from a distraught and discouraged reader, and it simply cries out for the collective wisdom of Casual Kitchen's readers. Read on, and share your thoughts:
*********************************
I'm responding to your post about the costs of "junk" and healthy food. Unfortunately, I've found that boxed mac and cheese sells for about 49 cents in my area, but each time I buy HEALTHY food, i.e. lean meats, fresh fruit, whole grain breads, etc. I can't get out of the store without spending at least $80. However, if I were to buy a few packages of boxed mac and cheese, some instant (boxed) potatoes, Hamburger Helper boxes, etc. - i.e. foods that are found on the shelves of the dollar thrift store, where many poverty stricken people shop, I could easily get out of there spending less than $20.
Even when I use coupons and shop the sale aisles at my local grocery store, I STILL can't get away with spending any less than $80 - $100 each time I shop for groceries. I've noticed that the HEALTHIER the foods I buy, the MORE expensive my food bill is.
And unfortunately, I DO know people who have a lot of money, and these folks toss money around like it's confetti. I happen to know a woman who spent several THOUSAND on a three year old's birthday party! It was ridiculous what she spent on the cake, alone, not to mention all the side dishes that the children couldn't have cared less about. Most of the food went uneatean at the end of the party, but it was "only money" so why should SHE care?
I wish this were not the case. People living in poverty are lucky to be able to buy a small birthday cake for their children, so it burns me up to see people go to such extremes in an attempt to impress somebody.
I'm so sorry to sound so negative, but unfortunately I've witnessed these things, and really wish I had NOT.
Julianne
Now, Casual Kitchen readers are some of the best experts out there on beating grocery stores and the food industry at their own game. What advice would you give Julianne?
Related Posts:
How to Get the Benefits of Organic Foods Without Paying Through the Nose
Dumb and Dumber: The Flaws of Measuring Food Costs Using Cost Per Nutrient and Cost Per Calorie
Let That Other Guy Pay! Saving Money in Two-Sided Markets
Guess What? We Spend Less Than Ever on Food
How can I support Casual Kitchen?
If you enjoy reading Casual Kitchen, tell a friend and spread the word! You can also support me by purchasing items from Amazon.com via links on this site, or by linking to me or subscribing to my RSS feed. Finally, you can consider submitting this article, or any other article you particularly enjoyed here, to bookmarking sites like del.icio.us, digg or stumbleupon. Thank you for your support!
*********************************
I'm responding to your post about the costs of "junk" and healthy food. Unfortunately, I've found that boxed mac and cheese sells for about 49 cents in my area, but each time I buy HEALTHY food, i.e. lean meats, fresh fruit, whole grain breads, etc. I can't get out of the store without spending at least $80. However, if I were to buy a few packages of boxed mac and cheese, some instant (boxed) potatoes, Hamburger Helper boxes, etc. - i.e. foods that are found on the shelves of the dollar thrift store, where many poverty stricken people shop, I could easily get out of there spending less than $20.
Even when I use coupons and shop the sale aisles at my local grocery store, I STILL can't get away with spending any less than $80 - $100 each time I shop for groceries. I've noticed that the HEALTHIER the foods I buy, the MORE expensive my food bill is.
And unfortunately, I DO know people who have a lot of money, and these folks toss money around like it's confetti. I happen to know a woman who spent several THOUSAND on a three year old's birthday party! It was ridiculous what she spent on the cake, alone, not to mention all the side dishes that the children couldn't have cared less about. Most of the food went uneatean at the end of the party, but it was "only money" so why should SHE care?
I wish this were not the case. People living in poverty are lucky to be able to buy a small birthday cake for their children, so it burns me up to see people go to such extremes in an attempt to impress somebody.
I'm so sorry to sound so negative, but unfortunately I've witnessed these things, and really wish I had NOT.
Julianne
Now, Casual Kitchen readers are some of the best experts out there on beating grocery stores and the food industry at their own game. What advice would you give Julianne?
Related Posts:
How to Get the Benefits of Organic Foods Without Paying Through the Nose
Dumb and Dumber: The Flaws of Measuring Food Costs Using Cost Per Nutrient and Cost Per Calorie
Let That Other Guy Pay! Saving Money in Two-Sided Markets
Guess What? We Spend Less Than Ever on Food
How can I support Casual Kitchen?
If you enjoy reading Casual Kitchen, tell a friend and spread the word! You can also support me by purchasing items from Amazon.com
via links on this site, or by linking to me or subscribing to my RSS feed. Finally, you can consider submitting this article, or any other article you particularly enjoyed here, to bookmarking sites like del.icio.us, digg or stumbleupon. Thank you for your support!
The "It's Too Expensive to Eat Healthy Food" Debate
There are some views held by well-meaning reporters and food bloggers that are so specious that it makes me want to hammer a nine-inch nail into my head.
The worst of these shibboleths is that it's too expensive to eat healthy food.
I've seen studies that attempt to prove Doritos cost less than lettuce by measuring foods on a cost-per-calorie basis (by this logic, tap water and zero-calorie diet soda have a cost of infinity). I've seen people compare the high cost of out-of-season organic produce with the low cost of dollar meals at McDonald's and consider it proof that healthy food always costs more than junk food. I've seen professional journalists make profoundly ignorant statements like "The solution that people live on lentils which are healthful and affordable is just ridiculous to me. Nobody wants to live like that."
That last statement is so negative, and so deeply arrogant, that I don't even know where to begin.
Look, if you want to eat both cheaply and healthily, you can't suffer from intellectual arrogance. You can't be close-minded. And you can't be in the profoundly negative habit of making blanket statements like "healthy food is too expensive." It is simply pointless to have a defeatist, all-or-nothing mindset like this.
Of course there are instances where unhealthy foods are cheaper than healthy foods. A simple example: 80/20 ground beef is 30-50c cheaper per pound than 90/10 ground beef, isn't it? And yet 80/20 beef has double the fat content of 90/10 beef. Therefore, 90/10 is "healthier" and--no coincidence--it costs more.
If you really think this is evidence that healthy food costs more than unhealthy food, then you haven't opened your mind enough to consider all your options. Why not entertain a creative and more open-minded third solution? Eat half your normal serving of meat (you can use either type of beef and the cost will be, well, half), and then make up the difference with a side dish of inexpensive greens sauteed with a few cloves of garlic. That solution is tastier, costs the least, and yet it's by far the healthiest of all.
Long time readers of Casual Kitchen know how to think about stacked costs and second order foods. They know that, all else equal, if a food has been processed, transported, advertised, or packaged, it will contain extra costs which are almost always borne by the consumer.
This is why if you want to save money and eat healthy, you'll want to focus your diet on whole, unprocessed foods, bulk grains and legumes, and simple, in-season and reasonably priced produce. You'll want to avoid buying branded foods, especially heavily-advertised branded foods, because those advertising costs are passed on to you in the form of higher prices. You'll want to avoid being the type of consumer who thinks food can't be truly "healthy" unless it has a magic organic sticker on it. And you'll want to read food blogs like this one offering a steady diet of laughably cheap, delicious and easy-to-make recipes. [See Casual Kitchen's 25 best "Laughably Cheap" recipes.]
And there will always be pricing idiosyncrasies in your grocery store. There are regular times each year when some healthy fruits and veggies go out of season and their prices skyrocket (and, thank heavens, every so often Doritos go on sale too). But, remember, pricing idiosyncrasies are opportunities, and you can take advantage of them if you stay open-minded and flexible. Don't go into a grocery store demanding grapefruit in October and blueberries in January. But when you see grapefruit at half the normal price in February and local blueberries on sale in July, stock up!
Casual Kitchen was founded on the idea that healthy food can be fun, easy to prepare and inexpensive. In fact, there are lots of foods and recipes out there that are be so inexpensive that it simply makes you laugh out loud--which is why I created the tag "laughably cheap" to categorize all of the best low-cost recipes here.
And no one says you have to live on lentils. That's just ridiculous to me. Nobody wants to live like that.
Related Posts:
Guess What? We Spend Less Than Ever on Food
If It's So Cheap to Cook at Home, Then Why is My Grocery Bill So Huge?
The Casual Kitchen Food Spending Poll: Results and Conclusions
Make Your Diet Into a Flexible Tool
When High-Fat Food ... Can Actually Be Healthy For You
The Pros and Cons of a High-Carb/Low-Fat Diet
Does Healthy Eating Really Cost Too Much? A Blogger Roundtable Discussion
How can I support Casual Kitchen?
If you enjoy reading Casual Kitchen, tell a friend and spread the word! You can also support me by purchasing items from Amazon.com via links on this site, or by linking to me from your own blog, or by subscribing to my RSS feed. Finally, you can consider submitting this article, or any other article you particularly enjoyed here, to bookmarking sites like del.icio.us, digg or stumbleupon. Thank you for your support!
The worst of these shibboleths is that it's too expensive to eat healthy food.
I've seen studies that attempt to prove Doritos cost less than lettuce by measuring foods on a cost-per-calorie basis (by this logic, tap water and zero-calorie diet soda have a cost of infinity). I've seen people compare the high cost of out-of-season organic produce with the low cost of dollar meals at McDonald's and consider it proof that healthy food always costs more than junk food. I've seen professional journalists make profoundly ignorant statements like "The solution that people live on lentils which are healthful and affordable is just ridiculous to me. Nobody wants to live like that."
That last statement is so negative, and so deeply arrogant, that I don't even know where to begin.
Look, if you want to eat both cheaply and healthily, you can't suffer from intellectual arrogance. You can't be close-minded. And you can't be in the profoundly negative habit of making blanket statements like "healthy food is too expensive." It is simply pointless to have a defeatist, all-or-nothing mindset like this.
Of course there are instances where unhealthy foods are cheaper than healthy foods. A simple example: 80/20 ground beef is 30-50c cheaper per pound than 90/10 ground beef, isn't it? And yet 80/20 beef has double the fat content of 90/10 beef. Therefore, 90/10 is "healthier" and--no coincidence--it costs more.
If you really think this is evidence that healthy food costs more than unhealthy food, then you haven't opened your mind enough to consider all your options. Why not entertain a creative and more open-minded third solution? Eat half your normal serving of meat (you can use either type of beef and the cost will be, well, half), and then make up the difference with a side dish of inexpensive greens sauteed with a few cloves of garlic. That solution is tastier, costs the least, and yet it's by far the healthiest of all.
Long time readers of Casual Kitchen know how to think about stacked costs and second order foods. They know that, all else equal, if a food has been processed, transported, advertised, or packaged, it will contain extra costs which are almost always borne by the consumer.
This is why if you want to save money and eat healthy, you'll want to focus your diet on whole, unprocessed foods, bulk grains and legumes, and simple, in-season and reasonably priced produce. You'll want to avoid buying branded foods, especially heavily-advertised branded foods, because those advertising costs are passed on to you in the form of higher prices. You'll want to avoid being the type of consumer who thinks food can't be truly "healthy" unless it has a magic organic sticker on it. And you'll want to read food blogs like this one offering a steady diet of laughably cheap, delicious and easy-to-make recipes. [See Casual Kitchen's 25 best "Laughably Cheap" recipes.]
And there will always be pricing idiosyncrasies in your grocery store. There are regular times each year when some healthy fruits and veggies go out of season and their prices skyrocket (and, thank heavens, every so often Doritos go on sale too). But, remember, pricing idiosyncrasies are opportunities, and you can take advantage of them if you stay open-minded and flexible. Don't go into a grocery store demanding grapefruit in October and blueberries in January. But when you see grapefruit at half the normal price in February and local blueberries on sale in July, stock up!
Casual Kitchen was founded on the idea that healthy food can be fun, easy to prepare and inexpensive. In fact, there are lots of foods and recipes out there that are be so inexpensive that it simply makes you laugh out loud--which is why I created the tag "laughably cheap" to categorize all of the best low-cost recipes here.
And no one says you have to live on lentils. That's just ridiculous to me. Nobody wants to live like that.
Related Posts:
Guess What? We Spend Less Than Ever on Food
If It's So Cheap to Cook at Home, Then Why is My Grocery Bill So Huge?
The Casual Kitchen Food Spending Poll: Results and Conclusions
Make Your Diet Into a Flexible Tool
When High-Fat Food ... Can Actually Be Healthy For You
The Pros and Cons of a High-Carb/Low-Fat Diet
Does Healthy Eating Really Cost Too Much? A Blogger Roundtable Discussion
How can I support Casual Kitchen?
If you enjoy reading Casual Kitchen, tell a friend and spread the word! You can also support me by purchasing items from Amazon.com
via links on this site, or by linking to me from your own blog, or by subscribing to my RSS feed. Finally, you can consider submitting this article, or any other article you particularly enjoyed here, to bookmarking sites like del.icio.us, digg or stumbleupon. Thank you for your support!
Let That Other Guy Pay! Saving Money in Two-Sided Markets
Continuing with our theme of Spreading The New Frugality, this article explains how you can save money on food and other consumer items by taking advantage of one of the idiosyncrasies of our modern economy: the two-sided market.
PS: For those of you who missed last week's post, the phrase "The New Frugality" is just a catchy-sounding name for plain old regular frugality.
************************
There's an intriguing section in Chris Anderson's otherwise mediocre new book Free discussing two-sided markets. These are markets where products are free or heavily subsidized for the end consumer, thanks to a third party who pays the bills.
The most obvious example of a two-sided market is broadcast media. Over-the-air television and radio are free to consumers because advertisers are willing to pay for access to a large audience.
But let's think about this arrangement a little more deeply. Who really pays in this kind of arrangement? In reality, the advertisers don't really pay. The people who buy advertised products end up paying. They pay in the form of higher prices.
If you see a national marketing campaign for Pepsi and at some point decide to buy a can of the stuff,
you should be well aware that in making that purchase, you indirectly pay for that advertising--as well as for several other embedded costs. Furthermore, you pay for incremental profit margins on top of all these costs because Pepsi, understandably, wants to make a profit selling bubbly brownish liquid.
Quite frankly, this model works exceptionally well. Forgive the finance-speak for a moment while I give a quick example of exactly how well: in the most recent quarter, Pepsi printed operating margins of 20.7%. During the worst recession in recent memory.
[Some of you might reasonably ask, "wait--are 20.7% operating margins good?" And I'm here to tell you that, yes, they are. Really good. Very few companies can maintain this kind of profitability long-term. Seriously, if I had a nickel for every money-losing technology company I met during my prior life on Wall Street that claimed it would earn 20% operating margins, I'd.... well, I'd have a very tall stack of nickels.]
Let's look at a few more examples of two-sided markets:
1) Free credit cards: Consumers who carry credit card balances and who do the most buying subsidize your access to free revolving credit.
2) Online pay sites: Online sites tend to obey a 5% rule, where 5% of users paying for a premium service generate enough revenue to subsidize a large pool of free users (e.g., Flickr or Yahoo Games).
3) Grocery stores: Grocers make the bulk of their profits on prepared and processed foods (what we call second-order foods here at Casual Kitchen). Therefore, shoppers who buy Hungry Man frozen dinners essentially subsidize shoppers who purchase simple grains and inexpensive in-season produce.
Okay, this is all very fascinating, but what is my point? Well, as we'll soon find out, this two-sided market model--where some pay and others get a free ride--works well not only for companies. This model works exceptionally well for consumers too.
For the consumers who put their money back into their pockets.
Nobody says you have to pay extra for heavily advertised or overpriced foods, products or services. Let others purchase them, and let those purchases subsidize you, while you buy less-processed and less-marketed items without these embedded costs.
This thinking goes far beyond the grocery store. In fact, you can apply it to practically every area of consumer spending. The big home renovation firm that advertises all over town will likely charge you an arm and a leg for a job, while the small-time contractor who quietly built a good reputation by word of mouth may do better work for much less. Instead of patronizing heavily advertised national chains, you might find better value (and much better food) at a local owner-operated restaurant. The eye doctor or dentist in a prominent, high-rent office in your community will likely charge high prices, but she may not necessarily give the best care. And so on.
However, don't misread this post and conclude that you should never do business with any company that advertises, pays a lot in rent or earns 20.7% operating margins. Nor does embracing The New Frugality forbid you from buying widely advertised second-order foods like Pepsi, Doritos, M&Ms or any of a long list of foods I myself occasionally indulge in.
The point of this post is to get you to think about what you are actually paying for when you buy products or services that are particularly expensive, heavily processed or heavily marketed. Ask yourself whether that incremental cost is worth it to you. If it's not, then choose to not buy.
This is the easiest way I know of to save a lot of money, not just in the grocery store, but in all areas of consumer life. It's never been easier to be frugal, and there have never been more reasons to embrace The New Frugality. Spread the word, and help those around you embrace it too.
Photo credit: Meanest Indian
Related Posts:
Spending to Save: Frugality and Expensive Food
Defeat the Diderot Effect in Your Kitchen and Home
Six Good Things About the Awful Economy
41 Ways You Can Help the Environment From Your Kitchen
How can I support Casual Kitchen?
If you enjoy reading Casual Kitchen, tell a friend and spread the word! You can also support me by purchasing items from Amazon.com via links on this site, or by linking to me or subscribing to my RSS feed. Finally, you can consider submitting this article, or any other article you particularly enjoyed here, to bookmarking sites like del.icio.us, digg or stumbleupon. Thank you for your support!
PS: For those of you who missed last week's post, the phrase "The New Frugality" is just a catchy-sounding name for plain old regular frugality.
************************
There's an intriguing section in Chris Anderson's otherwise mediocre new book Free discussing two-sided markets. These are markets where products are free or heavily subsidized for the end consumer, thanks to a third party who pays the bills.
The most obvious example of a two-sided market is broadcast media. Over-the-air television and radio are free to consumers because advertisers are willing to pay for access to a large audience.
But let's think about this arrangement a little more deeply. Who really pays in this kind of arrangement? In reality, the advertisers don't really pay. The people who buy advertised products end up paying. They pay in the form of higher prices.
If you see a national marketing campaign for Pepsi and at some point decide to buy a can of the stuff,
you should be well aware that in making that purchase, you indirectly pay for that advertising--as well as for several other embedded costs. Furthermore, you pay for incremental profit margins on top of all these costs because Pepsi, understandably, wants to make a profit selling bubbly brownish liquid.Quite frankly, this model works exceptionally well. Forgive the finance-speak for a moment while I give a quick example of exactly how well: in the most recent quarter, Pepsi printed operating margins of 20.7%. During the worst recession in recent memory.
[Some of you might reasonably ask, "wait--are 20.7% operating margins good?" And I'm here to tell you that, yes, they are. Really good. Very few companies can maintain this kind of profitability long-term. Seriously, if I had a nickel for every money-losing technology company I met during my prior life on Wall Street that claimed it would earn 20% operating margins, I'd.... well, I'd have a very tall stack of nickels.]
Let's look at a few more examples of two-sided markets:
1) Free credit cards: Consumers who carry credit card balances and who do the most buying subsidize your access to free revolving credit.
2) Online pay sites: Online sites tend to obey a 5% rule, where 5% of users paying for a premium service generate enough revenue to subsidize a large pool of free users (e.g., Flickr or Yahoo Games).
3) Grocery stores: Grocers make the bulk of their profits on prepared and processed foods (what we call second-order foods here at Casual Kitchen). Therefore, shoppers who buy Hungry Man frozen dinners essentially subsidize shoppers who purchase simple grains and inexpensive in-season produce.
Okay, this is all very fascinating, but what is my point? Well, as we'll soon find out, this two-sided market model--where some pay and others get a free ride--works well not only for companies. This model works exceptionally well for consumers too.
For the consumers who put their money back into their pockets.
Nobody says you have to pay extra for heavily advertised or overpriced foods, products or services. Let others purchase them, and let those purchases subsidize you, while you buy less-processed and less-marketed items without these embedded costs.
This thinking goes far beyond the grocery store. In fact, you can apply it to practically every area of consumer spending. The big home renovation firm that advertises all over town will likely charge you an arm and a leg for a job, while the small-time contractor who quietly built a good reputation by word of mouth may do better work for much less. Instead of patronizing heavily advertised national chains, you might find better value (and much better food) at a local owner-operated restaurant. The eye doctor or dentist in a prominent, high-rent office in your community will likely charge high prices, but she may not necessarily give the best care. And so on.
However, don't misread this post and conclude that you should never do business with any company that advertises, pays a lot in rent or earns 20.7% operating margins. Nor does embracing The New Frugality forbid you from buying widely advertised second-order foods like Pepsi, Doritos, M&Ms or any of a long list of foods I myself occasionally indulge in.
The point of this post is to get you to think about what you are actually paying for when you buy products or services that are particularly expensive, heavily processed or heavily marketed. Ask yourself whether that incremental cost is worth it to you. If it's not, then choose to not buy.
This is the easiest way I know of to save a lot of money, not just in the grocery store, but in all areas of consumer life. It's never been easier to be frugal, and there have never been more reasons to embrace The New Frugality. Spread the word, and help those around you embrace it too.
Photo credit: Meanest Indian
Related Posts:
Spending to Save: Frugality and Expensive Food
Defeat the Diderot Effect in Your Kitchen and Home
Six Good Things About the Awful Economy
41 Ways You Can Help the Environment From Your Kitchen
How can I support Casual Kitchen?
If you enjoy reading Casual Kitchen, tell a friend and spread the word! You can also support me by purchasing items from Amazon.com
via links on this site, or by linking to me or subscribing to my RSS feed. Finally, you can consider submitting this article, or any other article you particularly enjoyed here, to bookmarking sites like del.icio.us, digg or stumbleupon. Thank you for your support!
Spreading the New Frugality: A Manifesto
This essay discusses how frugality is suddenly coming back into fashion in our culture, and how we can do our society a favor by helping it along.
*********************************
As representatives of the small but growing minority of Americans who take pride and pleasure in spending less money rather than more, I believe we have an obligation to society to spread the ideas of The New Frugality--especially now.
What exactly is the new frugality? Well, it's really just the same as the old frugality. It just seems new to lots of people of this generation. But thanks to a stiff credit crisis, 10% unemployment and a good old-fashioned recession, being frugal is coming into vogue once again.
It may seem counterintuitive, but recessions are actually good for society. They help us put things back into their proper perspective, and they remind us that life is about much more than our stuff and our status.
Therefore, if there was ever a time for the frugal lifestyle to go viral, with all of the cultural, financial and environmental side benefits that accrue with it, it's right now.
Let's face it, humans tend to act in herds. That's why the stuff-and-status mindset became so contagious during the boom. Today, however, more and more members of society are casting off the old stuff-and-status lifestyle and they're trying out this newfangled frugality thing.
And they are finding that being frugal doesn't have to mean wearing tie-dyed shirts, cutting your own hair and being cheap. Not any more.
Instead, they are finding the real truth of the new frugality: that you can save money, be a better steward of the environment and live a higher quality life by thinking a bit more about what you buy and how you spend your money.
That snotty comment I made a few sentences ago about humans acting in herds? Well, watch what happens as the current recession progresses and as these heretofore heretical ideas about saving money rather than spending it begin to spread. More and more people will find it easier and easier to follow along.
So, to all my readers, and to all of the food bloggers, debt bloggers and frugal bloggers out there: our obligation begins now. We owe it to our economy and to our society to spread the culture of the new frugality. Now is the time, because there's never been a more receptive audience to our ideas.
If you've already taught yourself to cook and you've mastered some inexpensive recipes, share your skills by inviting your less-frugal friends over and cooking for them. You won't even need to say a word about the savings of cooking at home, just show them. The delicious food and the great times will make the idea an easy sell.
If you're a regular Casual Kitchen reader, then you've successfully escaped the clutches of the culinary-industrial complex and its overpriced second-order foods. Well, now it's time to help your friends escape too. Write about your ideas and insights on this subject in your own blog.
Do you usually meet your friends out for dinner and drinks? How about hosting a dinner party at home instead? Or instead of dropping $70 in a loud bar, shouting over your appletinis, why not learn to mix great drinks yourself and invite your friends to your home? You'll save money (not to mention your vocal chords), and your popularity will increase in direct proportion to your mixology skills.
Pretty soon, your other friends will want to host their own dinners at their homes. Guess what? Suddenly your entire social circle will be spending a fraction of what it used to spend, and you'll be having more fun than ever.
And if you don't yet know how to cook, team up with a friend and learn together. Scale your spice costs and your cooking gear purchases across two households. You'll eat healthier food, you'll learn some great skills--and you'll both save a ton of money.
These may be modest ideas, but they can have meaningful results. If each of us helped a friend save some extra money, spread just a little bit of our cooking knowledge, shared our ideas on frugality, or shared our time enjoying experiences that really matter, we could collectively make an enormous difference across the whole of our society.
Readers, what's your take?
Photo credit: Tracy O
Related Posts:
A Recession-Proof Guide to Saving Money on Food
Applying the 80/20 Rule to Diet, Food and Cooking
Seven Ways to Get Faster at Cooking
How to Team Up in the Kitchen
How can I support Casual Kitchen?
If you enjoy reading Casual Kitchen, tell a friend and spread the word! You can also support me by purchasing items from Amazon.com via links on this site, or by linking to me or subscribing to my RSS feed. Finally, you can consider submitting this article, or any other article you particularly enjoyed here, to bookmarking sites like del.icio.us, digg or stumbleupon. Thank you for your support!
*********************************
As representatives of the small but growing minority of Americans who take pride and pleasure in spending less money rather than more, I believe we have an obligation to society to spread the ideas of The New Frugality--especially now.
What exactly is the new frugality? Well, it's really just the same as the old frugality. It just seems new to lots of people of this generation. But thanks to a stiff credit crisis, 10% unemployment and a good old-fashioned recession, being frugal is coming into vogue once again.
It may seem counterintuitive, but recessions are actually good for society. They help us put things back into their proper perspective, and they remind us that life is about much more than our stuff and our status.
Therefore, if there was ever a time for the frugal lifestyle to go viral, with all of the cultural, financial and environmental side benefits that accrue with it, it's right now.
Let's face it, humans tend to act in herds. That's why the stuff-and-status mindset became so contagious during the boom. Today, however, more and more members of society are casting off the old stuff-and-status lifestyle and they're trying out this newfangled frugality thing.
And they are finding that being frugal doesn't have to mean wearing tie-dyed shirts, cutting your own hair and being cheap. Not any more.
Instead, they are finding the real truth of the new frugality: that you can save money, be a better steward of the environment and live a higher quality life by thinking a bit more about what you buy and how you spend your money.
That snotty comment I made a few sentences ago about humans acting in herds? Well, watch what happens as the current recession progresses and as these heretofore heretical ideas about saving money rather than spending it begin to spread. More and more people will find it easier and easier to follow along.
So, to all my readers, and to all of the food bloggers, debt bloggers and frugal bloggers out there: our obligation begins now. We owe it to our economy and to our society to spread the culture of the new frugality. Now is the time, because there's never been a more receptive audience to our ideas.
If you've already taught yourself to cook and you've mastered some inexpensive recipes, share your skills by inviting your less-frugal friends over and cooking for them. You won't even need to say a word about the savings of cooking at home, just show them. The delicious food and the great times will make the idea an easy sell.
If you're a regular Casual Kitchen reader, then you've successfully escaped the clutches of the culinary-industrial complex and its overpriced second-order foods. Well, now it's time to help your friends escape too. Write about your ideas and insights on this subject in your own blog.
Do you usually meet your friends out for dinner and drinks? How about hosting a dinner party at home instead? Or instead of dropping $70 in a loud bar, shouting over your appletinis, why not learn to mix great drinks yourself and invite your friends to your home? You'll save money (not to mention your vocal chords), and your popularity will increase in direct proportion to your mixology skills.
Pretty soon, your other friends will want to host their own dinners at their homes. Guess what? Suddenly your entire social circle will be spending a fraction of what it used to spend, and you'll be having more fun than ever.
And if you don't yet know how to cook, team up with a friend and learn together. Scale your spice costs and your cooking gear purchases across two households. You'll eat healthier food, you'll learn some great skills--and you'll both save a ton of money.
These may be modest ideas, but they can have meaningful results. If each of us helped a friend save some extra money, spread just a little bit of our cooking knowledge, shared our ideas on frugality, or shared our time enjoying experiences that really matter, we could collectively make an enormous difference across the whole of our society.
Readers, what's your take?
Photo credit: Tracy O
Related Posts:
A Recession-Proof Guide to Saving Money on Food
Applying the 80/20 Rule to Diet, Food and Cooking
Seven Ways to Get Faster at Cooking
How to Team Up in the Kitchen
How can I support Casual Kitchen?
If you enjoy reading Casual Kitchen, tell a friend and spread the word! You can also support me by purchasing items from Amazon.com
via links on this site, or by linking to me or subscribing to my RSS feed. Finally, you can consider submitting this article, or any other article you particularly enjoyed here, to bookmarking sites like del.icio.us, digg or stumbleupon. Thank you for your support!
Six Good Things About the Awful Economy
Wait. Seriously. Is the title of this post for real? What could possibly be good about the terrible economy right now?
On one hand, not much. Consider:
1) The average investor lost anywhere from 30% to 60% of his wealth over the past year or two.
2) Unemployment in the U.S. just ticked over 8%, a multi-decade high, and it's probably heading towards 10%.
3) Consumer spending is down and likely going lower.
4) Interest rates are nearing historic lows, so even the people who were lucky enough to have their money in cash and CDs are earning next to nothing on their savings.
So why did I title this post "Six Good Things About the Awful Economy?" What good can possibly come from the current economic backdrop?
Here's what good can come of it: If we're lucky, our priorities will change.
Perhaps we'll start to eat out less often and cook better, healthier food at home. There is nothing wrong with eating out in restaurants per se, but isn't it worth thinking a bit more about the incremental quality and value you get from the extra money you spend on a typical restaurant meal? Too often restaurants rely on high levels of sodium and saturated fat to make their food taste cloyingly "good" to us. And one restaurant meal at even a casual restaurant can cost more than a week's worth of groceries. Eating out less is a classic example of a win-win in food: you save money and eat healthier at the same time.
Perhaps we will start to grow more of our own food. Anyone can garden in their back yard, or even grow herbs and simple veggies in a pot on their porch or windowsill. It's a great way to save money and a great way to eat better. Many home-grown plants, especially herbs and spices, grow and grow and provide many years' worth of produce essentially for free. Other plants, when harvested, will provide you with seeds for next years's crop. There is no better way to increase your self-sufficiency and save a little money on food than to walk over to your little garden and harvest something you grew yourself.
Perhaps we'll bias our diet toward first-order foods and away from less healthy second-order foods. Second-order food are foods with greater costs baked into their production, either because they are prepared foods, heavily marketed foods, or foods that have traveled a long distance to get to your shopping cart. First-order foods are simple, basic, building block foods that are generally much healthier for you and usually cost a lot less too. If you're curious to learn more about this unusual way of thinking about the food industry and food costs, I've gone into the subject of first-order and second-order foods in much greater depth in a separate post.
Perhaps we'll start to eat less meat, making our diets both healthier and less expensive. The average American diet contains much more meat than any human being needs, and meat is one of the most expensive food items in our diets. Worse, the production of meat is particularly hard on the environment. We can help our pocketbooks--and our arteries--by embracing part-time vegetarianism and substituting healthier veggies and legumes into our diets.
Perhaps we'll take more control and ownership of what we eat. The necessary corollary of all of the above points is that we will know more about what we eat and we'll exercise more control over what we eat. This gets at the very foundation of what I'm trying to encourage here at Casual Kitchen.
Perhaps we'll collectively become a bit less consumerist. Admittedly, this particular point goes a bit beyond the food-based scope of this blog. But I believe it is worth asking this very simple question: what good came of the last few decades of our cultural imperative of keeping up with the Joneses? We created an over-indebted, consumption-based economy that, uh, well, let's just say it wasn't quite all it was cracked up to be. If we collectively rethink this point and only this point, I believe we'll be much better off as a culture.
Perhaps all of these things will cause us, as individuals and as a society, to eat better, live better, and be healthier. If that starts to happen, then I consider that a really good thing about our current economic situation.
Related Posts:
41 Ways You Can Help the Environment From Your Kitchen
15 Creative Tips to Avoid Holiday Overeating
A Recession-Proof Guide to Saving Money on Food
Cooking Like the Stars? Don't Waste Your Money
How can I support Casual Kitchen?
If you enjoy reading Casual Kitchen, tell a friend and spread the word! You can also support me by linking to me, subscribing to my RSS feed, or submitting this article, or any other article you particularly enjoyed here, to bookmarking sites like del.icio.us, digg or stumbleupon.
On one hand, not much. Consider:
1) The average investor lost anywhere from 30% to 60% of his wealth over the past year or two.
2) Unemployment in the U.S. just ticked over 8%, a multi-decade high, and it's probably heading towards 10%.
3) Consumer spending is down and likely going lower.
4) Interest rates are nearing historic lows, so even the people who were lucky enough to have their money in cash and CDs are earning next to nothing on their savings.
So why did I title this post "Six Good Things About the Awful Economy?" What good can possibly come from the current economic backdrop?
Here's what good can come of it: If we're lucky, our priorities will change.
Perhaps we'll start to eat out less often and cook better, healthier food at home. There is nothing wrong with eating out in restaurants per se, but isn't it worth thinking a bit more about the incremental quality and value you get from the extra money you spend on a typical restaurant meal? Too often restaurants rely on high levels of sodium and saturated fat to make their food taste cloyingly "good" to us. And one restaurant meal at even a casual restaurant can cost more than a week's worth of groceries. Eating out less is a classic example of a win-win in food: you save money and eat healthier at the same time.
Perhaps we will start to grow more of our own food. Anyone can garden in their back yard, or even grow herbs and simple veggies in a pot on their porch or windowsill. It's a great way to save money and a great way to eat better. Many home-grown plants, especially herbs and spices, grow and grow and provide many years' worth of produce essentially for free. Other plants, when harvested, will provide you with seeds for next years's crop. There is no better way to increase your self-sufficiency and save a little money on food than to walk over to your little garden and harvest something you grew yourself.
Perhaps we'll bias our diet toward first-order foods and away from less healthy second-order foods. Second-order food are foods with greater costs baked into their production, either because they are prepared foods, heavily marketed foods, or foods that have traveled a long distance to get to your shopping cart. First-order foods are simple, basic, building block foods that are generally much healthier for you and usually cost a lot less too. If you're curious to learn more about this unusual way of thinking about the food industry and food costs, I've gone into the subject of first-order and second-order foods in much greater depth in a separate post.
Perhaps we'll start to eat less meat, making our diets both healthier and less expensive. The average American diet contains much more meat than any human being needs, and meat is one of the most expensive food items in our diets. Worse, the production of meat is particularly hard on the environment. We can help our pocketbooks--and our arteries--by embracing part-time vegetarianism and substituting healthier veggies and legumes into our diets.
Perhaps we'll take more control and ownership of what we eat. The necessary corollary of all of the above points is that we will know more about what we eat and we'll exercise more control over what we eat. This gets at the very foundation of what I'm trying to encourage here at Casual Kitchen.
Perhaps we'll collectively become a bit less consumerist. Admittedly, this particular point goes a bit beyond the food-based scope of this blog. But I believe it is worth asking this very simple question: what good came of the last few decades of our cultural imperative of keeping up with the Joneses? We created an over-indebted, consumption-based economy that, uh, well, let's just say it wasn't quite all it was cracked up to be. If we collectively rethink this point and only this point, I believe we'll be much better off as a culture.
Perhaps all of these things will cause us, as individuals and as a society, to eat better, live better, and be healthier. If that starts to happen, then I consider that a really good thing about our current economic situation.
Related Posts:
41 Ways You Can Help the Environment From Your Kitchen
15 Creative Tips to Avoid Holiday Overeating
A Recession-Proof Guide to Saving Money on Food
Cooking Like the Stars? Don't Waste Your Money
How can I support Casual Kitchen?
If you enjoy reading Casual Kitchen, tell a friend and spread the word! You can also support me by linking to me, subscribing to my RSS feed, or submitting this article, or any other article you particularly enjoyed here, to bookmarking sites like del.icio.us, digg or stumbleupon.
Stacked Costs and Second-Order Foods: A New Way to Think About Rising Food Costs
My goal for today's post is ambitious. I want to give you an entirely new way to think about, and take advantage of, the food industry. After reading this article, you should have a new framework for understanding why some foods have become so expensive relative to others, and you'll also have several new practical ideas for beating food price inflation.
Before I get started, let me provide a brief warning for attention-span challenged readers: this essay approaches 1,600 words. If you don't have time to wade through it right now, feel free to come back later.
New Definitions
First, I'm going to use two new descriptive terms to define food in a totally different way: first-order foods and second-order foods.
First-order foods are the basic building blocks of our diets. Fruits, vegetables, unprocessed grains, beans and legumes, nuts, basic juices and even water are all examples of first-order foods. These foods require little processing and they come to you in basic form.
Second-order foods are simply foods derived from first-order foods.
Examples: TV Dinners, Doritos and Meat
Let's go over some brief examples to help illustrate this further. We'll start with the frozen dinner, which is an obvious example of a second-order food. The company that manufactures Lean Cuisine frozen dinners takes a combination of first-order foods, combines, packages and freezes them, and ships them to your local grocery store. The result? You can stand in the frozen foods aisle, shivering, and choose from a wide variety of frozen dinners, elegantly displayed in conveniently microwaveable cardboard boxes. Of course, you end up paying a premium for this convenience in the form of higher prices.
How about Doritos--one of my very favorite guilty pleasures? Unfortunately, that's another second-order food. A snackfood manufacturer takes corn, processes it into chips, mixes it with salt and other spices, and then packs it into plastic bags and ships it to your store.
Finally, meat is a more complex example of a second-order food, with several added process steps. The meat producer has to feed first-order foods (grain or feed corn) to his cows, chickens, hogs or other animals. He has to pay to clean, heat and/or air-condition the pens. Somebody has to pay to power and operate the plant that slaughters and processes the meat. Then, that meat is packaged in plastic wrap, frozen, and shipped to your local grocery store.
The Cost Stack
By now I'm sure you're figuring out where I'm going with this. Thinking about foods as either first-order or second-order gives you a simple model to explain why the prices of some foods are going up a lot more than others.
Let's use meat as an example. If corn prices (a primary input for animal feed) increase meaningfully, of course it's obvious that chicken or beef prices will increase too. But what if energy prices also increase? Suddenly, costs start rising for several steps involved in the making of second-order foods. Powering the farm and the meat processing plant gets more expensive. Transport costs increase for shipping grain, feed and supplies to the farmer. And of course the cost of freezing and shipping the meat to your local store increases as well.
If you think about this for a minute, it becomes quite clear that all second-order foods have a shocking number of layers of stacked costs:
1) Input costs for first order foods plus a reasonable profit margin for the suppliers,
2) Costs for food or meat processing, plus a reasonable profit margin for the processor,
3) Input costs for energy at all points of the production process, plus a reasonable profit margin both for the energy producer and the utility company,
4) Costs for transport, plus a reasonable profit margin for the transportation company,
5) Costs for branding and marketing, plus a reasonable profit margin for the advertising agency,
6) Costs for packaging.
You've just read through a sextuple-whammy of stacked costs, and I'm sure I left out a few.
You Shoulder the Cost Stack
I now have some terrible news for you: When you choose to purchase and consume second order foods, you end up shouldering the entire multi-layer cost stack.
It gets worse. These layers of extra costs tend to be multiplicative rather than additive, because each company throughout this supply chain passes their increased costs through to the next company, which passes those costs through to the next company, and so forth. Further, each participant in this supply chain (unless it wants to fail as a business entity) will need to tack on at least a little bit of profit margin above and beyond those extra costs--which then of course also get passed through to the next player.
This cost stack is what causes the prices of many second-order foods to increase monstrously, far out of proportion to the increase in the costs of their component first-order foods.
And of course meat products--because they are the most levered to energy costs and they typically have the most layers in their cost stack--give us the most monstrous examples of second-order food price inflation. This is why, with a 30% increase in the cost of a first-order input like chicken feed, and a 30% increase in the cost of energy, the price of the end product (let's say frozen plastic-wrapped chicken breasts), can easily increase by 100% or more.
Solutions
Let's stop with the bad news for a moment and switch to talking about solutions. At this point, you now have definitions of first- and second-order foods, an explanation of cost stacking, and you've seen an example of how cost stacking can drive substantial increases in second-order food prices.
And by now I'm sure you're squirming in your chair with your hand up, wanting to shout out the painfully obvious solution for beating food price inflation: eat more first-order foods and eat fewer second-order foods.
Yep. I knew all along that I had really smart readers.
Let me encourage you still more. The cost advantage of first-order foods over second-order foods is a non-linear function: the savings you get from eating first-order foods gets more compelling as food inflation worsens. Sure, the cost of all food (including the cost of first-order foods) may be going up, but because of our cost-stacking phenomenon, the cost differential between first- and second-order foods gets larger the more food and energy costs increase. Which gives you all the more incentive to bias your diet toward first-order foods.
Health Benefits
How about some more good news? As first-order foods become the foundation of your diet, you'll capture benefits beyond merely saving money.
For example, first-order foods are typically far healthier than second-order foods. They haven't been processed, so they retain more antioxidants with their massive health benefits. They aren't buried in salt, high-fructose corn syrup or sodium hexametaphosphate like many second-order foods. And there is an enormous body of evidence suggesting that if you limit your intake of processed foods, particularly those containing refined carbs and hydrogenated fats, you will have dramatically lower chances of becoming obese, developing cardiovascular problems, or developing Type 2 diabetes.
Practical Applications
So what are the practical steps you can take to focus your diet on first-order foods and take advantage of this new way to look at the food industry? At the risk of being overly prescriptive, here's a list of ten solutions to help you to break the grip of second-order food price inflation:
1) Adopt part-time vegetarianism.
2) Make basic staples, like beans, lentils, grains and white and brown rice, the foundation of your diet.
3) Eat more raw foods.
4) Cook more at home. Restaurant food has an enormous cost stack, including the restaurant's overhead expenses, branding and marketing costs, staffing costs, the air-conditioning bill, and so forth. And don't forget the cost of a generous tip for high-quality table service.
5) Bias your diet away from prepared foods (especially TV dinners).
6) Drop the traditional American conception of a "square meal." Vegetarians of course figured out this secret long ago, but the entire concept of having meat as the focal point of every meal is an obsolete construct.
7) Ruthlessly cut junk food and sweetened beverages out of your diet.
8) Buy foods grown locally, or near-locally. These foods will have lower embedded transport costs.
9) Grow your own food. This is ultimate example of a first-order food.
10) Refuse to pay for "excessively branded" products (full disclosure: we own shares in both Coke and Unilever so you can justifiably call me a hypocrite here). There is no reason to shoulder the cost of a national (or worse, global) advertising budget, especially if you can find equivalent generic products as substitutes.
Readers, if you have additional solutions, feel free to leave them in the comments section below.
******************
Epilogue
Let me take the liberty of adding one final wrinkle to this essay on first- and second-order foods. Don't worry--it's yet another piece of really good news, in my opinion anyway.
Just think: processed meat-like products such olive loaf and liverwurst are third-order foods, because they take high input cost second-order foods (mostly meat, I hope) and apply still more processing, energy, packaging and branding to create yet another level of "food."
So now, I have an airtight excuse never to eat olive loaf or liverwurst, ever. And with any luck, these so-called foods will soon become so expensive that they will go completely extinct, and no one will ever serve them to me ever again.
Who said there aren't advantages to rising food prices?
Related Posts:
Seven Ways to Get Faster at Cooking
All Casual Kitchen posts filed under "Vegetarianism"
All Casual Kitchen posts filed under "Laughably Cheap"
The Dinner Party: 10 Tips to Make Cooking for Company Fun and Easy
Cooking Like the Stars? Don't Waste Your Money
Ten Strategies to Stop Mindless Eating
Mastering Kitchen Setup Costs
How can I support Casual Kitchen?
If you enjoy reading Casual Kitchen, or tell a friend and spread the word! You can also support me by purchasing items from Amazon.com via links on this site, or by linking to me or subscribing to my RSS feed. Finally, you can consider submitting this article, or any other article you particularly enjoyed here, to bookmarking sites like del.icio.us, digg or stumbleupon. Thank you for your support!
Before I get started, let me provide a brief warning for attention-span challenged readers: this essay approaches 1,600 words. If you don't have time to wade through it right now, feel free to come back later.
New Definitions
First, I'm going to use two new descriptive terms to define food in a totally different way: first-order foods and second-order foods.
First-order foods are the basic building blocks of our diets. Fruits, vegetables, unprocessed grains, beans and legumes, nuts, basic juices and even water are all examples of first-order foods. These foods require little processing and they come to you in basic form.
Second-order foods are simply foods derived from first-order foods.
Examples: TV Dinners, Doritos and Meat
Let's go over some brief examples to help illustrate this further. We'll start with the frozen dinner, which is an obvious example of a second-order food. The company that manufactures Lean Cuisine frozen dinners takes a combination of first-order foods, combines, packages and freezes them, and ships them to your local grocery store. The result? You can stand in the frozen foods aisle, shivering, and choose from a wide variety of frozen dinners, elegantly displayed in conveniently microwaveable cardboard boxes. Of course, you end up paying a premium for this convenience in the form of higher prices.
How about Doritos--one of my very favorite guilty pleasures? Unfortunately, that's another second-order food. A snackfood manufacturer takes corn, processes it into chips, mixes it with salt and other spices, and then packs it into plastic bags and ships it to your store.
Finally, meat is a more complex example of a second-order food, with several added process steps. The meat producer has to feed first-order foods (grain or feed corn) to his cows, chickens, hogs or other animals. He has to pay to clean, heat and/or air-condition the pens. Somebody has to pay to power and operate the plant that slaughters and processes the meat. Then, that meat is packaged in plastic wrap, frozen, and shipped to your local grocery store.
The Cost Stack
By now I'm sure you're figuring out where I'm going with this. Thinking about foods as either first-order or second-order gives you a simple model to explain why the prices of some foods are going up a lot more than others.
Let's use meat as an example. If corn prices (a primary input for animal feed) increase meaningfully, of course it's obvious that chicken or beef prices will increase too. But what if energy prices also increase? Suddenly, costs start rising for several steps involved in the making of second-order foods. Powering the farm and the meat processing plant gets more expensive. Transport costs increase for shipping grain, feed and supplies to the farmer. And of course the cost of freezing and shipping the meat to your local store increases as well.
If you think about this for a minute, it becomes quite clear that all second-order foods have a shocking number of layers of stacked costs:
1) Input costs for first order foods plus a reasonable profit margin for the suppliers,
2) Costs for food or meat processing, plus a reasonable profit margin for the processor,
3) Input costs for energy at all points of the production process, plus a reasonable profit margin both for the energy producer and the utility company,
4) Costs for transport, plus a reasonable profit margin for the transportation company,
5) Costs for branding and marketing, plus a reasonable profit margin for the advertising agency,
6) Costs for packaging.
You've just read through a sextuple-whammy of stacked costs, and I'm sure I left out a few.
You Shoulder the Cost Stack
I now have some terrible news for you: When you choose to purchase and consume second order foods, you end up shouldering the entire multi-layer cost stack.
It gets worse. These layers of extra costs tend to be multiplicative rather than additive, because each company throughout this supply chain passes their increased costs through to the next company, which passes those costs through to the next company, and so forth. Further, each participant in this supply chain (unless it wants to fail as a business entity) will need to tack on at least a little bit of profit margin above and beyond those extra costs--which then of course also get passed through to the next player.
This cost stack is what causes the prices of many second-order foods to increase monstrously, far out of proportion to the increase in the costs of their component first-order foods.
And of course meat products--because they are the most levered to energy costs and they typically have the most layers in their cost stack--give us the most monstrous examples of second-order food price inflation. This is why, with a 30% increase in the cost of a first-order input like chicken feed, and a 30% increase in the cost of energy, the price of the end product (let's say frozen plastic-wrapped chicken breasts), can easily increase by 100% or more.
Solutions
Let's stop with the bad news for a moment and switch to talking about solutions. At this point, you now have definitions of first- and second-order foods, an explanation of cost stacking, and you've seen an example of how cost stacking can drive substantial increases in second-order food prices.
And by now I'm sure you're squirming in your chair with your hand up, wanting to shout out the painfully obvious solution for beating food price inflation: eat more first-order foods and eat fewer second-order foods.
Yep. I knew all along that I had really smart readers.
Let me encourage you still more. The cost advantage of first-order foods over second-order foods is a non-linear function: the savings you get from eating first-order foods gets more compelling as food inflation worsens. Sure, the cost of all food (including the cost of first-order foods) may be going up, but because of our cost-stacking phenomenon, the cost differential between first- and second-order foods gets larger the more food and energy costs increase. Which gives you all the more incentive to bias your diet toward first-order foods.
Health Benefits
How about some more good news? As first-order foods become the foundation of your diet, you'll capture benefits beyond merely saving money.
For example, first-order foods are typically far healthier than second-order foods. They haven't been processed, so they retain more antioxidants with their massive health benefits. They aren't buried in salt, high-fructose corn syrup or sodium hexametaphosphate like many second-order foods. And there is an enormous body of evidence suggesting that if you limit your intake of processed foods, particularly those containing refined carbs and hydrogenated fats, you will have dramatically lower chances of becoming obese, developing cardiovascular problems, or developing Type 2 diabetes.
Practical Applications
So what are the practical steps you can take to focus your diet on first-order foods and take advantage of this new way to look at the food industry? At the risk of being overly prescriptive, here's a list of ten solutions to help you to break the grip of second-order food price inflation:
1) Adopt part-time vegetarianism.
2) Make basic staples, like beans, lentils, grains and white and brown rice, the foundation of your diet.
3) Eat more raw foods.
4) Cook more at home. Restaurant food has an enormous cost stack, including the restaurant's overhead expenses, branding and marketing costs, staffing costs, the air-conditioning bill, and so forth. And don't forget the cost of a generous tip for high-quality table service.
5) Bias your diet away from prepared foods (especially TV dinners).
6) Drop the traditional American conception of a "square meal." Vegetarians of course figured out this secret long ago, but the entire concept of having meat as the focal point of every meal is an obsolete construct.
7) Ruthlessly cut junk food and sweetened beverages out of your diet.
8) Buy foods grown locally, or near-locally. These foods will have lower embedded transport costs.
9) Grow your own food. This is ultimate example of a first-order food.
10) Refuse to pay for "excessively branded" products (full disclosure: we own shares in both Coke and Unilever so you can justifiably call me a hypocrite here). There is no reason to shoulder the cost of a national (or worse, global) advertising budget, especially if you can find equivalent generic products as substitutes.
Readers, if you have additional solutions, feel free to leave them in the comments section below.
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Epilogue
Let me take the liberty of adding one final wrinkle to this essay on first- and second-order foods. Don't worry--it's yet another piece of really good news, in my opinion anyway.
Just think: processed meat-like products such olive loaf and liverwurst are third-order foods, because they take high input cost second-order foods (mostly meat, I hope) and apply still more processing, energy, packaging and branding to create yet another level of "food."
So now, I have an airtight excuse never to eat olive loaf or liverwurst, ever. And with any luck, these so-called foods will soon become so expensive that they will go completely extinct, and no one will ever serve them to me ever again.
Who said there aren't advantages to rising food prices?
Related Posts:
Seven Ways to Get Faster at Cooking
All Casual Kitchen posts filed under "Vegetarianism"
All Casual Kitchen posts filed under "Laughably Cheap"
The Dinner Party: 10 Tips to Make Cooking for Company Fun and Easy
Cooking Like the Stars? Don't Waste Your Money
Ten Strategies to Stop Mindless Eating
Mastering Kitchen Setup Costs
How can I support Casual Kitchen?
If you enjoy reading Casual Kitchen, or tell a friend and spread the word! You can also support me by purchasing items from Amazon.com
via links on this site, or by linking to me or subscribing to my RSS feed. Finally, you can consider submitting this article, or any other article you particularly enjoyed here, to bookmarking sites like del.icio.us, digg or stumbleupon. Thank you for your support!
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