Why Health Food Products Are So Expensive

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  • By Rhys Poirier, Owner & Founder
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Why Health Food Products Are So Expensive

Is it because scare tactics are an effective marketing strategy? Is it because developing a seemingly high-end product for the wealthy is a great business plan? Or, is it because producing and distributing health food items is a nightmare? Let's dive in to this complex topic.

We've all been there. You're at the grocery store standing in the healthy section's snack aisle when you see a $9 bag of kale chips that's only half full. Or, maybe you decided to look at the organic produce section and you noticed that the bag of organic carrots were marked up a full dollar more than the bag of non-organic carrots. 

There's a reason Whole Foods has been given the nickname "Whole Paycheck". Health foods simply aren't affordable for the average family. In fact, many families can't even afford for one person to eat healthy foods for every meal.

As a society, we're attempting to reverse what we did in the mid 20th century; we're trying to erase the advent of cheap, fast, and easily distributed food. the problem is that our current food practices have allowed our society and economy to grow to the scale it is now. It's going to take a great deal of ingenuity to maintain our current standard of living and make food more healthy and natural again. 

 

How Did We Get Here?

Putting our food supply through the American Dream of mass production fed the masses as the population boomed after World War II. It allowed lower-income families to focus on something bigger than where their next meal would come from. It also provided jobs for millions of people. Without a clear idea of what long-term health effects would come of fast food, it seemed like an ingenious solution. 

When you have a high-volume, low-price business, the key to your business' success is keeping your bottom line really, really low. 

What does that mean?

 

Factory Farming

I think we can all agree that factory farms are a deplorable environment for animals and are no doubt in violation of animal rights.

We began factory farming because keeping livestock can be a very unpredictable, and therefore risky, business. Keeping animals in cages and feeding them antibiotics is a cruel but effective way to neutralize a great deal of risk and provide economies of scale. The benefits are essentially:

- The farmer needs less land (saving overhead cost)

- Purchasing and operating in bulk (saving cost of sales)

- Automation (long-term cost of sales savings)

- Year-long farming (reduces seasonal shortages)

- A factory farm can be established almost anywhere

- Factory farming has led to new transportation, storage, and processing technologies that reduce food waste because food products now last longer without spoiling.

- Job creation

- A higher food supply

 

In a different time, when the question for millions of people was not "what will we eat tonight?" but "when will we eat again?", the mistreatment of animals seemed like a small price to pay. 

So, what happens when we reverse all of these processes and go back to traditional farming? Farmers would need to move away from cities and buy much larger plots of land. This means not only extending the supply chain, but a greater barrier of entry for the farming industry. Then, there's the issue of animals getting sick without the antibiotics in their food. Many more of them would die, and these losses would have to be overcompensated so that the farmer could make a living. Breeding also could not be controlled. Expecting an efficient farm with uninhibited animals is exactly like expecting to have an efficient company without rules. 

The same predictability principle is applied to organic produce. If you plant some wild seeds on relatively untouched land, you would loose a large number of your crops to bugs, diseases, imperfections (less than "self quality" appearance), and a smaller yield size.  

 

Ingredient Replacement

I don't think it's any big secret that different ingredients have different price tags, and people have used cheaper substitutions to lower the bottom line not just for decades, but for thousands of years. For instance, the modern use of high-fructose corn syrup to sweeten drinks instead of plain sugar is no different from putting sawdust in bread in the 19th century. Another example is the meat industry injecting their chicken breasts with water to sell for a higher price because their value is based on weight. 

The inability to substitute cheaper ingredients for more expensive ones drives up the price enormously because the initial cost of sales for the manufacturer will be much higher. From there, every company in the supply chain will need to take a cut as a percentage of the final sale. In other words, the manufacturer will sell their product for the price of ingredients + labour + 5-10% profit margin. The retailer, in turn, pays for the price of ingredients + labour + manufacturer's 5-10% profit margin of the wholesale price + delivery/distribution fees + their own labour + their own profit margin of the retail price (which is determined by however much they can sell it for). 

 

These are actual figures:

Regular Flour, Wholesale, 20kg bag = $21.00

Gluten Free Flour, Wholesale, 11.34kg bag = $80.00

 

Gluten free flour costs the bakery 8x more than regular flour, and it's the main ingredient in every batter. 

 

Labour

Not only do health foods take longer to produce/grow, but they take longer to process. Here, I'll use the example of working with gluten-free pie crust, which we all know is a nightmare! It splits apart without the elasticity of gluten, and putting it all back together again takes a great deal of time and skill. So, unless the producer raises the price, they will lose money. 

 

The Size of the Demand Market

As we all know and I've said before, if the prices are higher, a smaller percentage of the population will be able to afford it. In turn, the amount of product that can be moved will also be smaller, and the amount of waste will be higher. Psychologically, this scale also puts the supplier in a scarcity mindset. They will need to ensure that the sales that do happen cover the sales that don't. 

 

What Are We Going To Do?

Unfortunately, right now, nobody really knows. It's incredibly unfair that only the most wealthy get to eat healthy food. We can't call eating healthy an "option" when it's not attainable for the majority of the population. Let's call a spade a spade - as it exists right now, it's only for the highest earners. 

With J. Crawford, I've gone back to what I call the "No Frills Principle". In a capitalistic society, we can't do anything about the increased cost of ingredients and labour, but we can take out the retail front. With the invention of e-commerce, you don't need to go shopping for groceries anymore. You can have an amazing customer experience, keep health foods at a realistic price, and as an added bonus, you can also save retail food waste!

Technology got us into this mess, but I believe that it can also get us out of it. We just need to use our powers for good. 

 

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