Hiding Inflation in a Pound of Coffee



In my article For Consumers The Real Inflation Rate Means Getting By with 50 Percent Less I explained how the inflation rate was fraudulently being kept low by manufacturers who were "masking the increase in the selling price of their products by making those products smaller, fewer, shorter, thinner, narrower, lighter, or making the packaging puffier while keeping the retail price the same as the previous year."

In response, reader Gary Rumain (check out his blog at pislamonausea Central) opined:

There are some things, however, that you can't hide. A gallon of gas or a pound of beef or bananas will still be the same. So any change in their price will be noticed.

too much robusto in the coffee
Yuck!
Flickr-User: basykes
While that may be technically true, nothing prevents the manufacturer from lowering the quality of the pound of whatever they are selling - take the case of a coffeemaker who has found that inflation has caused Arabica coffee beans to go up in price; does he increase the selling price of a pound of coffee? No, he lowers the quality of the coffee and keeps the selling price constant to the consumer, thus masking the true inflation rate:

DailyFinance, 19 Jun 2012, The Bitter Truth About Why Your Coffee Isn't Tasting as Good Lately

Reuters is reporting that many of America's major brands have been quietly tweaking their coffee blends. While most coffee companies consider their blends trade secrets, and are loath to disclose exactly what goes into them, both circumstantial and direct evidence suggests they're now substituting lower-grade Robusta beans for some of their pricier Arabica, and degrading the quality of our coffee.

...

At least one coffee roaster has admitted it. In November, Massimo Zanetti USA, which roasts for both Chock full o'Nuts and Hills Bros., publicly confirmed upping its Robusta usage by 25% this year.

In this manner, pound for pound, the consumer is paying more for less Arabica beans and so, again, the inflation rate is not properly adjusted.

As for bananas, they're produced in over a hundred countries and are among the most widely consumed foods in the world [Source: Wikipedia]. They are purchased in such large quantities that they remain one of the cheapest products one can buy in a supermarket. Many supermarkets sell them as loss leaders, that is, selling them for less than what they pay for them (1). So bananas are currently immune from price increases.

Don't Raise the Price - Lower the Octane

As for gasoline, no gasoline company needs to worry about rising prices for its product - it's not like a car owner is going to overnight convert his car to burn cheaper biomass. However, if prices ever go insanely into the stratosphere, gasoline producers may consider lowering the octane of their gasoline. When my brother and I toured Poland in 1968 the first thing we noticed about their gasoline was that regular gas was rated 84 octane and their premium was 87 octane (corresponding to 87 and 91-93 in the US). After our Renault 6 vehicle coughed and wheezed through a number of backfires we had to upgrade our purchases to Polish premium. We never found a station selling anything akin to our high octane gas.

By the way, when we entered Poland that year customs gave us a two-sided map listing every single gas station in Poland, all 46 of them. One time we arrived at a gas station that had no petrol left to sell - we barely made it to the next one.

In case you are wondering why I am being so anal-retentive about inflation: A fake low rate of inflation prevents producers and retailers from properly and openly raising their prices to cover their true costs which have been rising and are not hidden from manufacturers. This will eventually lead to a retail packaging death spiral where we will end up buying gigantic, but mostly empty packages of cereals and snacks (see my article Buying Empty Space in Products Creates a Low Fake Inflation Rate) and air-puffed, water-injected fruits and vegetables, and such low quality ingredients as to make most of what we buy inedible.




ENDNOTES


(1):

Guardian Professional, 24 Oct 2013, Banana pricing: the unsustainable nature of the UK's favourite fruit

"British retailers have led the race to the bottom in the world banana market," says Smith, who alleges that UK supermarkets now frequently sell loose bananas for less than they buy them. He is calling for European regulators to crack down on the practice, which is illegal in many EU states.



### End of my article ###

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