Supermarkets - prices and inflation

An article caught my eye this morning on the BBC website, it was about Hummus, you know, the dip.

The article stated how Hummus had come from been a fringe hippy food to be a mainstream supermarket product.

I immediately began to think how expensive Hummus seems considering what it is, the chief ingredient is Chickpeas, and so this led me to conduct a little bit of an on-line investigation.
First of all I searched for the wholesale price of Chickpeas, most suppliers seem to be Indian, Turkish or Chinese, the average price per metric tonne seems to be around £1130, equating to 51p per pound.

Most major British supermarkets seem to sell Hummus for the same price (suspicious) of £1 per 200g tub, and 200g of chickpeas costs about 20p, ok so lets add on another 10p for the dash of olive oil and a bit of garlic + package = 30p.

Somewhere between the cost of raw ingredients and the retail price there is at least 235% profit been made by someone, ok so I accept there is probably a "middle man" or manufacturer between the ingredient supplier and the supermarket, but that still gives Asda and Tesco the opportunity to make at the very least a 100% profit margin.

What you're describing is the inherent weakness of the capitalist system - and one that will eventually lead to its downfall.

In order for capitalism to work, it benefits the nation to have as many of its people as possible to be employed. However, the more people who are employed, the more producers have to charge for their products, requiring higher wages for the employees, which, of course costs the producer more money, and that, in turn causes prices to go up, which then requires higher wages ... etc. so on ad nauseum.

Sure, all of those middle men get to have a job, but the price of goods is significantly higher because of it. A lot of middle men really do very little aside from, say, store a product in a warehouse somewhere between production and delivery, but it drives the prices through the roof. It's why buying wholesale is always cheaper than buying retail - no middle men.

Already in the West, we are seeing the inevitable beginnings of an economy where there are simply more people than there are jobs available, and it's going to get worse as technology improves. A company can only hire X number of employees and still remain viable (economy of scale) even if demand is higher than the company's output. Increased demand without increased production means higher prices, and that fuels the latent problem of needing to pay workers more so they can afford to buy the products they are making. Henry Ford knew this back in the early 20th Century, and it is why those working in the auto industry still make a lot more money than most other factory workers.

witchfinder wrote:An article caught my eye this morning on the BBC website, it was about Hummus, you know, the dip.

The article stated how Hummus had come from been a fringe hippy food to be a mainstream supermarket product.

I immediately began to think how expensive Hummus seems considering what it is, the chief ingredient is Chickpeas, and so this led me to conduct a little bit of an on-line investigation.
First of all I searched for the wholesale price of Chickpeas, most suppliers seem to be Indian, Turkish or Chinese, the average price per metric tonne seems to be around £1130, equating to 51p per pound.

Most major British supermarkets seem to sell Hummus for the same price (suspicious) of £1 per 200g tub, and 200g of chickpeas costs about 20p, ok so lets add on another 10p for the dash of olive oil and a bit of garlic + package = 30p.

Somewhere between the cost of raw ingredients and the retail price there is at least 235% profit been made by someone, ok so I accept there is probably a "middle man" or manufacturer between the ingredient supplier and the supermarket, but that still gives Asda and Tesco the opportunity to make at the very least a 100% profit margin.

Supermarkets make nice profits for their shareholders, and wouldn't long remain in business if they didn't, so we needn't waste any tears feeling sorry for them.

However they can't be criticised for giving the Public what the Public wants to buy. "Convenience foods" involve someone else doing the preparation we could do for ourselves if we wanted to. Most people with a whizzer in their kitchen could produce Hummous for very little money. How can anyone justify paying £1+ for a bag of lettuce leaves, or a large packet of crisps for £1.33 that contains the sliced and fried proceeds from one potato?

The principle continues with take-away Pizza, Kebabs, Chinese/Indian/Thai or good old British Fish 'n' chips that sell for two or three times the cost of the raw ingredients. They couldn't stay in business if people weren't too lazy to cook for themselves.

How much does it cost to buy houmous/hummus or whatever it's called out with a supermarket?

SCOTTISH dairy farmers are quitting the industry in their droves as supermarket price wars continue to eat into farmers’ returns, new data has revealed. (Farmers Guardian)

The big 4 supermarkets dictate the price to be paid, they dictate to dairy farmers, food growers, fishermen and they dictate to producers and manufacturers, I have seen the devastating effects of how a large supermarket chain decides on your survival.

In one of the neighbouring towns to where I live a dairy employed around 100 people, after promises by a well known supermarket / food chain to buy its products, it was bought out by a co-operative of dairy farmers, and less than a year after the co-operative bought the dairy the supermarket chain ended the contract claiming it could buy cheaper elsewhere.

That particular dairy closed down making 100 people in a small town redundant

As a small time producer of food, I can identify with some of the concerns here. Let's begin at the beginning of the process flow for food.
 
1. The farmer. Long ago, there were these things called Mom and Pop farms. They grew some food for themselves and some for market and were dreadfully INefficient but generally happy places. Then big government demanded more efficiency and more productivity from the farmers. Either they got big or they got dead. No other options. Now we have "efficient" ag operations where it is no big deal to collect several million dollars worth of equipment just to deal with a lot of land in a short time with minimum labor. Anybody check out the price of a new combine recently? As an aside, a couple of years ago, I had to buy a new lawn mower for the orchard. It cost me almost as much as the first house I bought back in 1970.
2. The farmer sells his products to some processor or other who will have to pay enough to keep the farmers in business or else. But they also have to deal with more government than the farmers did. Now we have wages and working conditions to worry about and, quite often unions to consider, land and equipment to buy and maintain. These people have to process their feedstock in such a manner as to keep the shareholders happy, the unions happy and the downstream customers happy.
3. And they sell to the wholesalers who face similar problems trying to keep unions happy, keep the government happy, keep the shareholders happy and keep their downstream customers happy when they sell to the ...
4. retailers. Again much interaction with government. Now we also have to worry about land taxes in upscale neighbourhoods plus all the government that the other guys have to worry about.
 
So what does this do to your 235% profit WH? First, we have to ask just how much of it has been swallowed up by governments all along the way. Let us consider that governments will be involved with industry from many many different departments ranging from environment to safety to pension benefits to corporate tax and more.  Then we have to also ask how many of these union members are actually earning their outrageous salaries. And on and on it goes. Let's not just assume that some bloated capitalist is skimming the cream off the top because it just ain't so.
 
And I also doubt if it is an inherent weakness in a capitalist system although it is definitely a weakness inherent in a system that has had the blessing of too much interfering government.
 
gator

What gator appears to be criticising is "Intermediaries". It's not a simple matter for a householder to buy a pint of milk from the Dairy Farmer, so various stages intervene to pasteurise the milk, bottle it, carry it to market and get it onto the retail shelf. Nobody wants to do any of that without payment.

It's not a simple matter for a householder to buy a pint of milk from the Dairy Farmer

----------------------------------------------------

So So true OW!

If you are caught getting FRESH milk from the farmer, he can lose his licence!

Gone are the days of knocking on the Farmer's door and buying a quart of milk and a dozen eggs!


Memories!!

And I also doubt if it is an inherent weakness in a capitalist system although it is definitely a weakness inherent in a system that has had the blessing of too much interfering government.

All you have to do is look at the math, gator. No capitalist system can survive forever with constantly increasing prices coupled with stagnant wages. The spending power of the average American has dropped precipitously since the 1960's even if the raw dollar amount has increased. In an economy based on consumer spending, the more money spent on food, energy, and rent/mortgage, the worse the overall economy will perform. Ironically enough, the housing bubble burst because the scheme the banks and speculators were running required prices to increase infinitely. We're seeing that same scheme being played out over a long period of time with the rest of the economy, so it's only a matter of time before it bursts as well.

Either prices have to plateau or wages need a serious bump, and I doubt either will ever happen.

For the benefit of gator, my political beliefs are centre-left, I suppose if I were Canadian I would be a Liberal Party supporter.

There is absolutely nothing wrong with business, making a profit or capitalism, just so long as there are regulators, regulations and rules to protect you and I - the general public, and this is where Conservatives in the world consistently get it completely wrong because Conservatives dislike regulation and regulators.

If banks had been properly regulated and had more stringent rules, the credit crunch and banking crisis would not have happened, indeed president G W Bush himself opposed stricter banking regulation before the crisis hit in 2007.

Human nature naturaly makes humans greedy, most big businesses are greedy, a good example is how energy and oil companies raise consumer prices when oil, gas & electricity prices rise, but do not bring the consumer price back down when the cost falls, a crafty way of making a few extra dollars / pounds.

Most farmers are pretty decent people, they are usualy very hard working people and all they would ask is for a fair price for what they produce, I happen to feel that the big powerful supermarkets should not be able to decide which farmers / growers survive, and which ones are made bankrupt.

The spending power of the average American has dropped precipitously since the 1960's even if the raw dollar amount has increased.
 
Any idea why that is? My guess is that is is a combination of greed on the part of big biz, greed on the part of big gubmint and greed on the part of big unions. Each and every one of them want control. There ain't a lot left in the way of small biz any more in the food industry for the masses. Oh sure, there are a few like me who cater to those with money but anyone who is trying to make a go of it in grain, beef, fowl etc will have to cater to the cost per unit first and foremost. That includes a healthy [or unhealthy] dose of government and probably some union grief as well. It seems to me that it is a far too complicated problem for us to solve in a no account forum on the internet. Who among the movers and shakers ever listens to the likes of us anyway?
 
gator

The USA has never been a poor Country, though it has always contained an extraordinary proportion of poor people. The 1930s were difficult times, but the economy was transformed by WW2 which made USA's industry the supplier to half the World, a happy situation that continued right up to the failed policy called Reaganomics.

Since then it's been an unstoppable slide back into normality.

Is it really the supermarkets that are dictating the prices? Is it not the consumers, surely if the price of the items on the shelf are higher than somewhere else, the consumer will go to the somewwhere else?

Between 1990 and 2010, Sainsbury's turnover increased from £6.9 billion to £21.4 billion. Just one example.

Crisis or not the shareholders get fatter year by year, suppliers are squeezed to death and the young employees are exploited to the nth degree.

"Cheap food", where??? Profit making on hiked prices on top of the above
is criminal. However will never be regulated by government regulation, especially a Tory one. I wonder why?

Sainsbury's turnover may have increased from 6.9billion to 21.4billion, but in the same period how many new stores have they opened? How many new jobs have they created?

We often hear that new supermarkets are being opened and that they are creating X number of jobs which sound good in these hard times but it should be remembered that almost all of these jobs are part time....yes a lot of people have some work but not nearly enough to have a real living wage.....

In my local town one of the nation Supermarket Chains is opening a new store with the headline of creating 300 new jobs but most of these jobs are for just 22.5hours per week which given minimum wage is £6.05 an hour means it just put these workers in to the basic rate tax......

Yes it helps the governments unployment figures in that it will have reduced the number unemployed by 300 but when looking at Whole Time equivalents it is only 170 full time jobs.....

"most of these jobs are for just 22.5hours per week"

Why is that, do you think?

No holidays to pay, no pensions to pay, the tax take is lower than having a full time employee, no sickness to pay for

Add more to the list at your leisure/pleasure -

Many supermarkets employ 16year olds at £2.50 per hour, then sack them when the become eligible for the min wage.

The supposed idea is that they take a small wage so as to be trained.
What a farce?

Some of you may have heard of Filey on the Yorkshire coast, indeed some posters may have even been there.

Not a lot happens in Filey, though the parish church spire was damaged by the Dogger Bank earth quake back in 1931, it has a population of about 7,000 people, and is actualy a very pleasant, unspoilt and relaxing resort.
There was until last year just one reasonable sized supermarket in Filey (Safeways), several quite small convenience supermarkets and quite a lot of independent shops.

The new Tesco store in Filey opened last year, it is a considerable size and infinately bigger than any other store in the town, last week Safeways announced that they are to close down, there are lots of small independent, family businesses in Filey, most of them are struggling, they cannot compete with Tescos.

What is the answer and who is to blame ?

To me, the bottom line is that people are to blame, its the choice of people to shop in Tesco rather than the other shops which forces the little bakery and the high street butcher to close down.

Tesco - car parking = FREE

What are the parking charges on the main shopping drags and municipal car parks in the town?

Why risk a parking penalty when all that worry can easily be avoided?

The people who make the choice of where to locate a Superstore know us better than we know ourselves.

Must agree OW. The local council give planning permission, they're elected locally, hence the good people of Filey wanted the convenience of a large store. No doubt it's cheaper than the rest and offers more choice, it's a harsh world out there.

Quite often a local planning authority finds itself between the proverbial rock and a hard place. Denying permission can result in the Developer appealing to the High Court, in which the loser pays all of the legal costs.
In the current financial climate, few Councils want to find themselves facing a potential bill for hundreds of thousands of pounds dependant on the whim of a Judge.

Actually the wages they pay are such a small part of the budget. The electricity would be more me thinx. If there were a way to find the biggest cost, it would be purchases, then transport. Then there would be expired goods, which could be sold en masse to the poor just before they expire.

I find a clearance sale every month will do them wonders. If they were to get rid of all of the goods just before they were to sell them, they should not think if they want the goods they will buy the new ones - think about planning to sell all of your goods... I am sure that will bring in more money!

Oliver Burkeman in a recent Guardian column commented how the Modern Consumer Economy is full of spurious pseudo-luxuries, labelled by Venkatesh Rao as "premium mediocre". Better than basic, but not true luxury and as such over-priced. Examples are truffle oil, "extra-legroom" (but still tiny) seats on a plane - and anything which is called "signature". Poor value for money and any pleasure obtained is outweighed by the expense.

I might add "Priority booking" for tickets which simply cost more than face value. Don't you agree?