Did you ever wonder why breakfast cereal is so danged expensive? Its a question I've often thought about when perusing the cereal isle. The only explanation I'd ever heard was that cereal is just so bulky its expensive to transport, store and takes up a lot of shelf space. But hey so is toilet paper and all kinds of cheap-n-bulky stuff. So after putting away a bowlful of the light and crunchy stuff this morning I thought I'd actually google the same issue and see what anyone else thought or had found out about the issue.
According to one article the issue of cereal prices is something that has been investigated by various government agencies many times before, and not once has the charge of over-charging or price fixing stuck. To me this all sounds like all the investigations of gasoline prices - lots of huffing and puffing but never much conclusion. The one thing that never seems to get communicated to the public after them is a clear and simple breakdown of where all the $5 a box goes to. I feel like such info should be readily be available, and on the tips of peoples tongues when they are trying to choose between brand name and no-name cereals.
The article goes on to conclude that the issue of high cereal prices is basically a myth, which to me sounds ludicrous - we've all seen no-brand cereals that are very significantly cheaper than the gammut of branded cereals so what gives? Can the brand guys really claim that the difference is entirely due to advertising costs? Of course not, they'll tell you they have a superior product, something that in many cases is difficult to say for sure. Furthermore it would seem the price premium placed on that quality improvement is usually far beyond the actual cost.
Another article I found referenced a 1993 magazine article on the "cornflake cartel" which estimated the raw ingredient cost of a box of cereal at just 6% of the total price. This should give you an idea of how specious the premium ingredient claim would be. Say the manufacturer used a premium ingredient costing twice the normal price - it would only add an extra 6% to the total price. Yet in reality the difference between premium and no-brand cereals is often more like 25 to 50%. That's a pretty high markup. Can you really believe that you're actually paying a $2 or more per box just for advertising costs? But then again I would say that even the cheap no-brand products seem extremely pricey given their raw material costs. We know that cereal grains are a vastly overproduced commodity, so much so that the government has to subsidize its production just to make it worth farmers while to grow it. And a box of puffed up and pulverized corn probably has just a handful of corn in it. Shouldn't it be basically about $1 a box? At that price I could buy it with impunity and worry about the real cost... there has to be a real explanation of why breakfast cereal quantitatively and qualitatively feels like a big over-puffed, over priced rip-off.
Anyway, having thought and blogged about this I'm coming to the conclusion that probably almost no one cares. When people are willing to drop $3 or more for a cup of coffee or $5 for a bucket of pop-corn why should they care about spending $5 for a box of cereal that will give them at least a half-dozen cheap and crunchy breakfast meals? The only people who I think will give a damn about it are those with lots of kids to feed and those growing millions at or below the poverty line who really can't afford to pay top-dollar for cereal. I guess the answer then is to buy bulk oatmeal (I've seen it in 50lb bags for less than 75 cents a pound) and send the kids to school with a stomach full of porridge - just like I got when I was a kid. Mmmmm, porridge... the cornerstone of a hearty Scottish breakfast, how appropriate as a low cost alternative to overpriced cornflakes and the like.
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