How Technology Pushes Down Price
1 Prices have fallen in the food business because of advances in food production and distribution technology. Consumers have benefited greatly from those advances. People who predicted that the world would run out of food were wrong. We are producing more and more food with less and less capital. Food is therefore more plentiful and cheaper than it has ever been. Spending on food compared with other goods has fallen for many years, and continues to drop.
2 Supermarkets have helped push down prices mainly because of their scale. Like any big business, they can invest in IT systems that make them efficient. And their size allows them to buy in bulk. As supermarkets get bigger, the prices get lower.
3 Huge retail companies such as WaI-Mart have tremendous power and they can put pressure on producers to cut their margins. As a result, some producers have had to make cuts. In recent years,Unilever has cut its workforce by 33, 000 to 245, 000 and dropped lots of its minor brands as part of its "path to growth" strategy. Cadbury has shut nearly 20 percent of its 133 factories and cut 10 percent of its 55, 000 global workforce. These cuts help keep costs down, and the price of food stays low.
4 Does cheap food make people unhealthy? Cheap food may encourage people to eat more. Food companies certainly think that giving people more food for their money makes them buy more. Giving people bigger portions is an easy way of making them feel they have got a better deal. That is why portions have got larger and larger. In America, soft drinks came in 8oz (225g) cans in the past, then 12oz (350g), and now come in 20oz (550g) cans. If a company can sell you an 8oz portion for $ 7, they can sell you a 12oz portion for $ 8. The only extra cost to the company is the food, which probably costs 25 cents.
5 Now companies are under pressure to stop selling bigger portions for less money. But it is hard to change the trend.
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27. Big supermarkets can offer food at lower prices because they can buy in
28. Some food producers have reduced
29. Besides cutting its cost, Unilever also abandoned its
30. Buyers like bigger portion because they think they have got