One good example of this is cereal. When I try to buy it all natural cereals with only 3 to 5 ingredients, it may end up costing me $7 to $10. But if I try to buy a similar cereal that has 10 times the ingredients, I can usually find them easily for 2 to 5 dollars.
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What the ingredients are, how much of the ingredients are used, and how much it cost the company to source those ingredients?
Nothing crazy… it’s just that simple.
Number of ingredients does not equal price of ingredients. 3-5 ingredients could cost 4 dollars but something with 30 ingredients could only cost 1$. Think of its this way a bowl of quarters would be worth more then that same size bowl of pennies, nickels, and dimes. This is how ingredients work they are not all equal in quality or price.
When companies add ingredients to foods they usually dont add expensive ones, they add cheap stuff specificly to make more profit.
Take apple juice. If an apple cost 10 cents and you need 10 apples to make one liter. It cost the company $1 to make the bottle. If you instead take 5 apples 500ml of water for .1 cents and about a .2 cent for 5 grams of sugar to get the same sugar content as 100% apple juice the apple juice now costs 50.3 cents to make.
Also, chemically synthesized ingredients are not as vulnerable to weather season climate, as you can produce them consistently in a factory, nor do you have to worry about their timely controlled delivery to warehouses and factories. So you don’t have to worry about crop yields, oil and energy prices, etc like you do with more “natural” ingredients, when making the product, thereby reducing its cost. Sometimes this is great for us, so we can have staple foods all year long at stable prices. Sometimes it’s really bad for us, since we are compromising our health for convenience, cost, or profit. It really depends on the specific product. What you want is to be informed and knowingly choose one or the other, if you can. Unfortunately many cannot, but that’s another story.
Apart from the price of the ingredients, production costs are important. Here one must look for efficiencies and lleconomies of scale when dealing in bulk. For example, shipping in bulk costs very little over a long distance. Travel costs increase the closer products get to your front door.
Production: You can think of a big factory churning out a standard cereal, but perhaps a better example is McDonald’s where you can see production happen. They buy a few ingredients cheaply by buying in bulk. Then they make it using standardised processes and unskilled labour. Then they sell a fixed range of products.
Compare this to a proper restuarant or even your own kitchen.
The number of ingredients does not really matter in regards to cost, mixing stuff is cheap. What the ingredients are does matter. Some ingredients cost more the others.
A number of ingredients can have a effect on cost if what is removed is preservatives. A product with a shorter shelf life needs to get to the store and be sold faster. Shorter shelf life means more spoiled product in the store that needs to be discarded. More generally, is can be the state of the produce; frozen vegetables can cost less than fresh because they last a lot longer. I do not think this is relevant for cereals
The price of stuff is alos not a direct result of production cost but a result of what customers are willing to pay and how much you sell at a price point. The best way to look at is what is the price that maximises profit. An increase in cost often leads to a decrease in several sold products. It is the product of profit per item and the number of sold items you want to maximise
It is not always the case that a higher price results in fewer sold items. A customer can believe that a higher cost means the product quality is higher. It can alos be a way to show off, for a fashion item of high cost can be very important because you can by wearing them, show others you can afford the.
For food, if you can claim or imply it is healthier, you can often charge more. Natural is an example of something that does not really mean that much. The whole idea that something natural is good for you is not even correct. Botulinum toxin is the most toxic substance known, and totally natural, so is arsenic and mercury, bacteria that cause disease etc. It is an extreme example, butit shows that just natural means nothing,
So the cereals that is expensive with few ingredients might be more expensive because the produces know the customers are willing to pay more for them.
it
I have 1kg of beef. I grind it up and sell that 1kg in 100g portions for 2 bucks. I make 20.
The next time i have 1kg of beef when I grind it I add 1kg of sawdust and get 2kg of ground beef. I sell 100g portions again this time for 1.50 buck. I make a 30 bucks.
Fillers are cheap. Lots of ingredients are fillers.
1 gold is more expensive than one iron and two coppers.
Whole food’s entire shtick is that instead of the most efficient ingredients, you’re getting the most “natural”. If these natural ingredients were also the most efficient to obtain then walmart would be selling it too and there’d be no reason to go to whole foods.
There could be many reasons why a “natural” ingredient would be less efficient than its “artificial” counterpart. Maybe you’re using actual animal feces to get nitrogen into the soil instead of fixing via haber-bosch. Maybe you’re using natural arsenic to kill pests as opposed to something cheaper. Maybe your plants aren’t genetically engineered to resist some fungus so now you have to obtain and spray fungicide.
Also with artificial ingredients you can break raw materials down into constituent chemicals and then just include the chemicals you need rather than the entire raw material. Purified chemicals tend to be easier to ship (consider how fruits can bruise and rot, but pure sugar you pump around through tubes and ship at room temperature). Sometimes you can’t do that with a “natural” ingredient because then the extracted chemical will appear on the box label as a chemical name and it doesn’t appear “natural” anymore.
The other answers aren’t incorrect; they just don’t answer the question.
What goes into something doesn’t determine its price. Highly processed cereal is not going to be (much) cheaper to manufacture than less processed cereal. There may be some scope for the cheaper stuff to actually be cheaper (due mostly to economies of scale), but that’s a small part of the story; and everyone’s explained that part of it.
What determines how much a product sells for is what people are willing to pay for it, and that comes from what they get out of it.
Highly processed cereals are for people who are just looking to buy any cereal. This means that cereal marketers compete on price, to get you to pick up their box of cereal. If you want any cereal, and they’re all functionally the same, then you’re most likely going to go for the cheapest.
However, less processed brands of cereal aren’t for people looking for just any cereal; they’re people trying to fulfill a specific diet, with additional constraints compared to the average person. If you’re operating under special constraints, if you’re going for something non-standard, you’re going to be willing to pay more to satisfy your specific demand, over and above the generic demand fulfilled by big standard cereal.
And because the people who want it are willing to pay more for it, the people who sell it charge more for it.
Most replies focus on cost. But cost isn’t the sole determinant of price. Find ways to “clean label” ingredients or just leave stuff out, write “all natural” on the box, charge more, done.
Actually you don’t even need to change the product or packaging. Where I live, you can buy the same darn Lucky Charms at the Jewel-Osco for $2 or at the upscale Sunset Foods where the rich folks shop for $7. It’s all in what shoppers are willing to pay.
The ‘additional ingredients’ are cheap filler so they don’t have to use as much of the good, expensive product.
So you mean like lucky charms cost more than some boutique cereal at Whole Foods? There’s a few reasons. First: more ingredients doesn’t necessarily mean more costs. What matters is how expensive the ingredients are and how much of them you need. The boutique companies probably source more expensive ingredients. They are also inherently less efficient. General Mills is a massive corporation that loves food in huge volume from large factories so they’re always going to be able to do it at a lower cost than the smaller guys.
Take a bottle of juice concentrate. Pour a small
Amount into a glass. Add water.
The more water you add, the less juice is in the finished drink.
The juice is the primary cost. The rest is just cheap filler.
Pour the juice into cartons, and you have juice boxes. The less concentrated ones contain more cheap “water”, so they can be sold cheaper.
So adding stuff in addition to the primary content actually lowers the expense, as it effectively lowers the amount of the primary content. Add some cheap flavor chemicals to compensate for the missing taste.
Now, add some chemicals to the juice boxes, that makes the juice last longer before going bad. That’s even more ingredients. – But now you can send more boxes to the store in fewer larger shipments, instead of a constant steady stream of shipments, cutting down on transportation costs, further lowering the cost of the product.
Sure, it’s bad and unhealthy chemicals, but plenty of people are unaware of their awful properties, and only see the cheaper price.