General Mills to raise cereal prices

I lied. It would appear more of our (American) breakfast aisle is going up in price. I think Business Week captured the issue as neatly as one could imagine – and all in the first paragraph!

General Mills Inc. said on Tuesday it would raise cereal prices to match increases by competitors, but investors sent its shares down more than 3 percent, and one analyst downgraded the stock.

(I define ‘paragraph’ loosely). The squeeze then is put on families who eat this stuff in the morning, all in the name of ‘margins’ – yet it still won’t do any good if those margins are going down. If you’ve any sense, drop General Mills, Inc. and buy stocks in corn and guns. I still say to buy gold, but I’m pessimistic like that.

The interesting thing from the perspective of bringing one’s ‘goods’ (I’ll return to this in a second) to market is that General Mills isn’t merely following the market (e.g. Kellog Co.) in price movements, but packaging also. They discovered a very clever way to hide the appearance – on paper – of their price hikes:

General Mills spokesman Tom Forsythe said customers should actually see lower prices per box, but the boxes will be smaller, so the effect is a price increase of a few percent.

General Mills, see, has had larger box-sizes than the competition, so they can gamble, quite reasonably, on laden-cart-pushing parents not catching on too well that the boxes aren’t as big as they used to be. Of course they’ll soon figure out they don’t last as long as they used to, though, and the whole plan might just backfire – another incarnation of the mythical 7% rule? Who knows.

However, General Mills is also gambling that a box of their cereal lasting longer isn’t a big deal for ordinary harried parents who might not be too quick on shopping according to the price-per-ounce section of the label (non-Americans: supermarkets have prices-per-ounce, as well as the price for the item in question, for food. The price-per-ounce is smaller (meaning the font size on the shelf-label is smaller), though. Brits will already be familiar with this, and more, and I wasn’t paying attention the last time I was back in Australia, so who knows what’s happening down there).

After all, another (literally, in my course) textbook example of elasticity uses breakfast – specifically that family breakfast cereals in toto are relatively price-inelastic (meaning General Mills has little to risk by following the market upwards in price) because there are few substitutes. However there are substitutes for mere Cheerios, or whatever-the-hell-else-kids-eat-these-days (I just paid about 9 bucks in an import store for a box of Weetabix minis, so I may not be the best at this anyway), and if it was not-having-to-buy-as-often that these parents were using as the signal of value in General Mills products, there could be trouble ahead.

The company is also planning on culling some sizes altogether – and if parents see those go missing from the shelves it may add to the notion that the company is getting unkind to families trying to pump their shit into their kids during trying times.

And why? That we already know: the price of energy and – alley oop – corn.

I need to go off and learn whether the fact that in my local supermarket in Bethlehem, PA, I can’t find a single goddamn box of cereal (including the muesli) that doesn’t contain high fructose corn syrup is a factor, or whether it is just the basic corn that everything (including dodgy types of food for my turtle) seems to use as hamburger-helper these days.

Does it matter? Not really. The damage high fructose corn syrup is doing to our kids isn’t the issue here, the price of day-to-day groceries is (here is another interesting point for debate. Family breakfast cereals are hardly necessities, but can the Wonder Years generation, raised on suburbs, two-car garages and shiny supermarkets break the habit and return to basic wheat-and-a-spoonful-of-sugar breakfasts?). I think most people are still in a mindset wherein increasing utility bills will be seen as too much. I honestly don’t think ‘people’ are mentally prepared for losing actual capacity to buy what they had considered last week to be perfectly ordinary groceries. I see some wide avenues for pandering by Presidential candidates ahead…

Finally, did you think the problem stopped at something as easily identified as breakfast cereal? No chance. Not under the US FDA, are you crazy?

Near record high prices for corn mean that farmers are feeding their pigs “people food” according to an article in The Wall Street Journal. With demand for ethanol booming, American farmers are facing a dilemma when it comes to feeding their livestock. The Wall Street Journal reports that some farmers are increasingly relying on food waste to feed their animals.”Besides trail mix, pigs and cattle are downing cookies, licorice, cheese curls, candy bars, french fries, frosted wheat cereal and peanut-butter cups. Some farmers mix chocolate powder with cereal and feed it to baby pigs,” writes Lauren Etter.

“California farmers are feeding farm animals grape-skins from vineyards and lemon-pulp from citrus groves. Cattle ranchers in spud-rich Idaho are buying truckloads of uncooked french fries, Tater Tots and hash browns.”

“In Pennsylvania, farmers are turning to candy bars and snack foods because of the many food manufacturers nearby. Hershey Co. sells farmers waste cocoa and the trimmings from wafers that go into its Kit Kat bars. At Nissin Foods, maker of Top Ramen and Cup Noodles, farmers drive to a Lancaster, Pa., factory and load up on scraps of the squiggly dried noodles, which pile up in bins beneath the assembly line,” she continues.

And that’s just to keep meat cheap enough for you to be willing to buy it at the supermarket. Where you are legally incapable of finding out where that round mound of meat came from, what it ate and how it died (unlike in Europe, where supermarkets are legally obliged to let you find these things out – a colleague of mine had an interesting perspective on that, which we can discuss another time). Me, I’m ever more glad that I’m vegan.

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