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The economies of scale in salt (and hot sauce baffle me). Let me use the hot sauce example, because it's a little more fun, but all the ideas apply equally to s
by kaycebasques 5y ago
The economies of scale in salt (and hot sauce baffle me). Let me use the hot sauce example, because it's a little more fun, but all the ideas apply equally to salt. How is it that I can buy a big jar of Crystal's hot sauce for like $2? Someone had to plant those peppers, produce vinegar, bottle it, transport it to San Francisco, let the grocery store mark it up, and it still only costs $2???
- jonshariat 5y agoDitto. It also blows my mind how stores operate. I think how can they offer so much verity and stay in business? They paid for all this food and its all going bad or out of season, how?
- Joker_vD 5y agoThey plan. You know, estimate what and how much people would buy and stock accordingly. Pretty advanced stuff!
- selimthegrim 5y agoI don't know specifically about Crystal, but when I went to Avery Island a couple hours away I saw Tabasco/McIlhenny had whole warehouses of drying and pickling peppers - I imagine they can control supply as needed and keep the wholesale price where they want.
- sumtechguy 5y agoThink about it this way. It is about margin (where the profit comes from). Keep that marginal cost equal to your marginal rev and you are doing good. Stray too far and you are leaving money on the table or maybe taking a loss. Control a couple of key aspects of production and your marginal cost can be low. In this case I would say the jar and lid is probably the most expensive bit and the salsa is probably made by the barrel full. Also most grocery stores do not set the prices or own goods on the shelves. The wholesalers/vendors typically do and the grocers rent out the shelves to them based on location in the store, height off the floor, and length/depth of shelf needed.
- BitwiseFool 5y agoWe also live in an era of cheap energy. 'Astonishingly cheap' doesn't even begin to describe how much more we have to work with than our ancestors did. It enables modern economies of scale and things like buying imported prosciutto from Italy rather than just buying some preserved ham from the local farmers market.
- gbronner 5y agoI saw a video that suggested that the sriracha guys have an area roughly 1/3rd the size of manhattan under cultivation. Nobody cares what those peppers look like, and the tilling, planting, and harvesting, washing, and crushing are all pretty automated. Vinegar and salt are also pretty cheap, as is bottling equipment.