The high price of cookies. Only you can end it.

I just came across the blog called Conditional recoil of a guy who I used to work with on a pretty much daily basis in my last job (through a link on facebook) and I think it's a great read. He doesn't have that many posts up there yet but the ones he does are the type of posts that make you think.

In particular, though, there was a post from last November titled "Where does it end?" that I felt I needed to respond to. If you know me, you'll know why. ;)

I agree with what he is trying to say which is basically that corporate America is hosing the consumers that buy it's products because in many cases they are. However in (slight) defense of the particular industry he picked as an example (and in turn, all other industries). There are many direct costs that people neglect to take into account when figuring out what things really cost. In this exact example:

* He didn't account for labor to bake, package, label and put out said package of cookies. (Plus don't forget the ever increasing cost of benefits for the workers.)

* Then there's the cost of the actual package. (Which due to energy and material costs, which you guessed it, are increasing.)

* Don't forget the energy to run the ovens and keep the lights, heat and a/c on. (Which also increases in cost from year to year. Are you seeing a trend?)

* Transportation costs to get the case of cookies from the warehouse(s) to the stores. (Fuel costs aren't going down, you know.)

* On top of all of that how much is your time worth? How much would you pay to not have to bake the cookies you'd like to eat? Your time and convenience are also worth money...

I'm not going to detail what it costs for the above things. Instead, I'm going to simplify the equation.

Companies ARE in the business of making money and that's exactly what successful companies do. The more money they make for their owners or investors the more successful they are and the longer they stay in business.

So the answer to the question "Where does it end?" is that it all comes back to the consumer. Things tend to cost what people are willing and able to pay. If there are people out there that are willing to pay $3.99 for a package of ready to eat cookies, that's exactly what they're going to cost.

[So now that we simplified everything down to the statement that things cost what people are willing and able to pay, I'm going to re-complicate it if you're willing to continue reading.]

All of the other cookie providers that are competing for your cookie purchase also know what people will pay. How the different businesses differentiate themselves is how they gain your business over the other competitors.

* They can charge slightly less on cookies and hope that you'll buy something else that they make more profit on while you're there. (How much profit is in a cup of coffee?)

* They can have a better location that makes it easier for them to get their cookies in front of you.

* They can advertise.

* They can play up the quality of their cookie and/or how they're freshly baked (and directly or indirectly that they're better than the other guy's cookies).

It goes on and on... but the end result is the same. You want the cookies, you don't want to bake them yourself and the companies that are selling cookies want as much of your money that you're willing to let them have.

The ONLY way to make the price of cookies come down is really just to stop buying them. If nobody is buying cookies the price will either go down to a price that the customer is willing to pay (at which point the customer will resume cookie buying) or the cookies will not be available any more if they cost more to produce than the customer is willing to pay. You'll have to buy the ingredients separately and make them yourself.

The things like the cost of the raw cookie dough or ingredients, packaging, energy, transportation, labor, benefits, etc. do factor back into the equation if you can lower the tangible costs of producing and supplying the cookies in order to get them back to a level where a lower price for finished cookies still leads to an acceptable profit for the company selling them. However, if we attempt to go down this path we'll see that there are many more deep "root causes" for why the cost of everything keeps increasing which makes lowering costs difficult.

* America's "energy policies" (if you can call them that) are a little bit frightening. I'm constantly reading stories about people fighting against wind turbines ("I don't want that eyesore in my backyard." and "What will happen to the birds that fly into them?") and stifling other promising energy production methods for other ridiculous reasons. On top of that there are the people who think we should take over the Middle East by force because we're entitled to drive gas-guzzling SUV's powered by imported oil. We need to find ways to lower the cost of energy and don't involve direct conflict (which costs a lot of money).

* The cost of health care and insurance really needs to be addressed. (That's enough about this one.)

* Property costs were rising at rates we're now beginning to see weren't sustainable. (Which leads to increases in cost for rents, leases and purchases of property which also leads everything to cost more.)

There are tons of issues... I really could go all day on this topic but I keep coming back to the fact that if you really don't like the price of something the only thing you can really do is stop buying it. That'll send a undeniable message that you're not willing to pay what the seller is charging. If others do the same then things start to change...

(Broken links removed March 24, 2010.)