Do you ever scratch your head at how supermarket food prices get so low?
And why? Why, for example, would supermarkets sell milk for less than it costs to produce it?
So far this series of articles has looked at the effect of specializing too heavily in milk production at the expense of other functions—on an individual cow and in the context of industrial dairying—and the real cost of industrial-scale food production.
This article closes the series with a brief exploration of how and why the global food industry drives food prices low – in many cases much lower than the cost of production.
WHY do food prices get so low?
Continuing on with our milk theme, let’s explore briefly what the reason might be why supermarkets sell milk at a price per liter that is significantly less than the cost of producing it.
Did you ever wonder why you have to go all the way to the back of the supermarket, to get the milk?
Supermarkets need traffic. They need feet—lots and lots and lots of feet—tramping through the aisles day after day. If traffic dwindles, so does profit.
So, some products in the supermarket are there to make a profit (the sweets at the check-out counter and the soft drinks in the stands at the ends of the aisles—the two places that get the most traffic—have the highest profit margins).
And some products in the supermarket are just there to bring traffic. In Australia, we like to have a cuppa tea, or coffee. And many of us take it with milk. We are also big breakfast cereal eaters, and you eat cereal, usually, with milk.
Milk goes off quickly (especially if it’s been pasteurized, but that’s another topic) so you have to buy it often, in small quantities. Ta-dah! A way to get the traffic to the back of the supermarket!
But what about the loss on the milk sales? Those losses are recouped via the ability to shoulder smaller food sellers out of the market and monopolise the traffic, and with ridiculously large profit margins on cheaply manufactured food (fake food).
HOW do food prices get so low?
Two of the reasons [i] why large supermarket chains are able to consistently out-compete smaller, local food sellers on price are global low-cost sourcing and distribution of food [ii], and economies of scale.
Supermarkets are the end point of a vast global system of industrial production, manufacturing, and marketing that now feeds most of the world’s population.
“The food industry is a complex, global collective of … businesses that supplies most of the food consumed by the world’s population. Only subsistence farmers, those who survive on what they grow, and hunter-gatherers can be considered outside the scope of the modern food industry.”
I’m going to close this series of articles by approximately summarizing two of the steps that the Global Food Industrytakes to keep food prices low on our supermarket shelves.
How to monopolize the supermarket shelf
(This sub-title could have read, “How to monopolize the supermarket shelf and drive small, diverse, local food producers out of business or convert them into monoculture producers.” But it would have been too long.)
Step one: Search the poorest countries in the world for subsistence farmers who grow the type of golden egg you want to sell. Buy it from them at the lowest possible price.
Here is some more detail from Charles’s Eisenstein on how to do this (the bold emphasis is mine):
“Disrupt [local] networks of reciprocity by introducing consumer items from outside [the local economy].
Erode [local peoples’] self-esteem with glamorous images of the West.
Demean [their] mythologies through missionary work and scientific education.
Dismantle traditional … local knowledge by introducing schooling with outside curricula. Destroy [their] language by providing that schooling in English or another national or world language.
[Cut their] ties to the land by importing cheap food [from other regions in which this same process has already been completed] to make local agriculture uneconomic.
Then you will have created a people [who are needy enough to sell their golden eggs at rock bottom prices].”
Step two: Ship the golden eggs to the richest countries in the world and sell them there at a cheaper price than the locally produced equivalent.
Selling at a cheaper price than the locally produced equivalent is possible because the Global Food Industry:
- Pays the lowest possible price to the farmer;
- Uses vast economies of scale to keep costs low in bringing the food to the supermarket shelf;
- Is able to sell at a loss in order to get consumers hooked on low prices and take business away from local food sellers [iii];
- Erases the story of the food so that there is no connection between the grower and the buyer, no way for the buyer to know the impact of their choice on anything other than their own wallet.
Supermarket food is cheap; real food is priceless
Supermarket food has to be cheap because it only fills the stomach. It cannot meet your needs for direct, visceral connection and interaction with family, community, and nature.
Real food, in contrast, nourishes more than just the stomach. Participating in the growing, harvesting, and preparation of real food nourishes our spirits, our relationships, and our connection to nature, as importantly as the food nourishes our bodies.
In communities where producing and preparing food in the company of friends and family makes a significant part of the day’s work, the line between work and play blurs and people don’t die of stress-related heart attacks.
Can you put a price on that?
Cow/calf dairying at Smiling Tree Farm. An excellent series of 8 blog posts from a small, ethical dairy farm, describing in detail the how and the why of keeping dairy calves with their mothers until natural weaning age.
Unlike a globalised food system local food won’t destroy the environment. This article explains how economic policies systematically promote large scale monocultural production over small scale, sustainable production models, and how this global low-cost sourcing and distribution of food enables large supermarket chains to consistently out-compete ethical food sellers on price. It also lists the social, environmental and economic costs of this bias, as well as the benefits of local food.
Localization – a strategic alternative to globalized authoritarianism. After an introductory paragraph about the author’s worry over the political scene in the US, this article goes on to illustrate clearly what globalization is and how it works. By Helena Norberg-Hodge, the creator of Economics of Happiness and of “Ancient Futures: Lessons from Ladakh for a Globalizing World”
Ascent of Humanity: The Age of Separation, the Age of Reunion, and the convergence of crises that is birthing the transition by Charles Eisenstein. All I’ll say about this is that it’s an epic read and one of the most influential books in my life.
Kate writes at ARealGreenLife.com– an exploration into thinking differently and living a more natural, connected, and sustainable life. Download a free copy of “Ditching the Supermarket: Make a difference, save money, live better.”
[i] One of the biggest sources of profit for supermarkets is cheaply manufactured fake foods, but that’s a separate topic.
[iii] When it first opens in the middle of town, bringing super-low prices and a huge range of foods, the big new Woolworths, Coles, or Aldi Supermarket runs at a loss, supported by the rest of the nation-wide chain. Once customers are hooked and the small, locally owned supermarket has folded, then the large supermarket raises its prices, ready to help support the take-over of the small food seller in the next town. Business as usual.