Monday, January 24, 2011

Does Healthy Need to be Expensive?

I read a truly bizarre article today asserting that fresh fruits and vegetables should be made more expensive -- so that people will value them more. Specifically, that Wal-mart’s plan to make fresh fruits and vegetables less expensive in their stores was a sure-fire plan to paradoxically tank demand for fresh fruit and vegetables.

Now, she undoubtedly learned from a business class that there actually is a paradoxical effect where people do not want to pay too little for some things, like heart surgery, spokespeople, branding specialists, tax lawyers -- you know, high stakes services where paying too little can be a fatal mistake.

But in a market where a carrot is, mostly, a carrot, someone is not very likely to “value” the carrot more if it is $5 a pound than if it is $2 a pound. This is the exact reason why you don’t find things like fresh Chilean Sea Bass, Persian Caviar, Saffron or expensive exotic fruits in your local Wal-Mart: High price makes their customers buy less, just like you’d think. They may buy relatively expensive beer there, but they are unlikely to guzzle the stuff, more have it to offer to guests or celebrate a good meal; during the football game, the case of the cheap stuff comes out.

Do Wal-Mart customers typically head straight to the rib eye when they need meat? I don’t know, but I’d be willing to guess that they are a little more price sensitive than that, and that that behavior would be more common at Whole Foods.

Think of it another way, for people who already value a carrot, will they value it more if the price goes up? Will they switch to parsnips? Does someone who needs a screwdriver value it more if it more expensive? Does he buy a hammer instead if the screwdriver is too affordable?

If Perrier or Gerolsteiner raise the price of their water, it may indeed increase units sold of those brands at Whole Foods for a certain highly manipulable segment of the middle class, but the average Wal-Mart customer would likely think those people are stupid. And, consider this; would one brand raising the price of water cause people in general to drink more water? I don’t think so. Water is certainly valuable, but people don’t pipe it into their homes because it is expensive.

Keri Kennedy, manager of the West Virginia’s health department's Office of Healthy Lifestyles was interviewed after Huntington, West Virginia was ranked Least Healthy in the whole USA. Her insight as to why people don’t eat well in West Virginia’s largest city: People don’t think they can afford to eat well; people who are watching prices are not only sensitive to price, but to convenience as well, so they really go for the various “value meals” that are offered at the take-out windows of the chain fast food restaurants because they see the compare the price of fresh broccoli, meat, etc, and compare it to the price and convenience of the value meal and they find the fresh ingredient route lacking, so, the I think the author’s theory is utter nonsense. Getting that yet?

I’m sorry if I am coming across as the Queen of Obvious here. But these people are out there, and they apparently have M.B.A.s.

But perhaps the writer is not as crazy as she seems, we learn at the end of her article that she would like to be the conduit of healthy food to markets, especially in New York City, and the idea of Wal-Mart not only moving into "her" territory but also making their food more affordable and healthy probably deeply depresses her, since Wal-Mart is, shall we say, notorious for giving their customers what they want, and being very good at what they do. Not something against which someone who practices business in a “how can we make products more unaffordable to the middle class?” sort of way would enjoy competing, no doubt.

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