The CAIPS Retriever

My family doctor won't discuss philosophy

During the annual checkup, my family doctor asked how my diet was going lately. I answered that, although I am 100% favorable to healthy eating, I am not eating totally healthy because I feel bad about being penalized for it. "I have a problem with spending more than I can afford just for the purpose of being a healthy eater," I said. She replied that it is only natural for produce (the number one example of healthy food) to be more expensive in winter because it is being shipped from farther South, that we should sacrifice money for our health and that she did not intend to further discuss philosophical matters with me, period. Because my doctor won't listen, I will discuss philosophy with you.

Should produce really be more expensive in winter?

Let me begin by exploring my doctor's assumption that the difference in produce prices between winter and summer is explained by local scarcity caused by unfavorable weather conditions (the dreaded Canadian cold). At that point, warmer climate produce growers step in to bridge the demand gap, but consumers have to bear additional shipping costs.

When trying to isolate the influence of transportation costs, my grocery store's pricing does not verify my doctor's assumption. During my frequent shopping trips I observed that Ontario‑grown produce is the most expensive and, despite additional shipping costs, Mexico‑grown produce is the least expensive. California‑grown produce prices come in between. It really is not important where produce comes from.

Further analyzing the idea of seasonal scarcity, I took a closer look to my tomatoes. They are hydroponics. No soil, no sun or natural heat is involved in their production. With a little research, I learned that higher energy costs required by hydroponics are widely balanced by savings on watering, pesticides and by much higher efficiency. Most importantly, hydroponics can be grown year round almost anywhere. So, where does this scarcity idea come from?

Should I be penalized for eating healthy?

Contrary to my doctor, I believe assuming that my grocery store uses a cost‑based pricing strategy will lead nowhere. Pricing is exclusively about what is in the (final) consumer's mind. What I believe is that my grocery store plays the game of scarcity. In order to charge me more, my grocery store wants me to think that produce‑growing has remained a seasonal business.

In my opinion, it is a counterproductive game. Why? Because if my consumer mind tells me that produce is seasonal, I will eat less of it during winter - substitutes are all around. It is also a bad game because higher markups don't automatically mean higher profits. Take a look at the automobile industry: you might think that expensive brands boosting high markups are highly profitable but they're not. Today Jaguar or Mercedes are just names, the companies that created these brands no longer exist. The companies that bought and own these brands today - Ford and Chrysler - simply fare better selling popular cars. Take another look at examples of companies from other industries that lower prices only to fly high on wings of profits: Wal‑Mart for retail, Dell for computers or McDonald's for foodservice.

If, following my championing of lowering prices, there is any doubt or argument about quality in your mind, I will just point out what everybody knows: the quality of my healthy food is far from being outstanding. Both fruit and vegetables are meager in taste and languish in my grocery store's isles in a state that evolves directly from unripe to rotten. It is a serious setback from the seasonal production's past times that only supports my initial argument about being penalized.

How to price for healthy profits

Doctors strike the final blow: they call for legislation curbing advertising for unhealthy food. They make it look as if the gain from lower quality food's lower cost is funneled into advertising. To the contrary, because of the serious misperception that people willingly chastise themselves, healthy food just fares worse than unhealthy food. It does not make economic sense to limit profits by obsessively marketing to a converted elite. Sooner or later, someone will lower prices. In an increasingly competitive setting, exacting higher markups is not a good idea, as substitutes are plenty. Compare Dell to IBM and Compaq: Dell's strategy to invest in just efficiency will only be beaten by a competitor able to sell better products at even lower prices. And, by the way, if advertising is curbed, the price of unhealthy food will go up and we will all end up poorer.

The truth is that, irrespective to the product sold, there are good marketers and bad marketers. On the one hand, carbonated beverages are an excellent example of good economic sense: there is no price premium for sugar substitutes sweetened sodas. Instead of trying to penalize consumers that wish to avoid sugar, soda manufacturers try to attract them. On the other hand, certain product lines targeted to diabetics outrageously double or triple the price just for substituting sugar with artificial sweeteners. For everybody's sake, my grocery store should start playing the game of making itself attractive to customers.