Prices are on everyone's mind lately. This is not surprising, as food prices have risen over 13 percent since last year. Pandemic, war, climate change and livestock catastrophes are still wreaking havoc on supply chains. And many food companies took advantage of these crises to raise prices even further and reap huge profits. The last couple of years have been the most profitable for corporations since 1950, including many big food retailers and manufacturers. Walmart and Kroger in particular, which together account for almost 40 percent of all grocery sales, have leveraged higher prices and profits to pay out billions in dividends to shareholders. And one study showed that over half of all food price increases are the result of profit mongering by big grocery, meat, beverage and snack food companies. So if you want to understand how prices work, start at the grocery store — possibly at the egg case.
Eggs are one category that can be particularly helpful in illustrating how pricing works in the real world, since eggs are purchased by the vast majority of households. Egg prices have risen dramatically in recent months, affected by avian flu, which scrambled egg production and lowered overall supply. Eggs are also heavily segmented as a retail category. This means that there are multiple price points and quality attributes for eggs. Such segments can be marketed to different customer groups based on income, geography, personal values and tastes. Segmentation is how grocery merchandisers organize and price products, including what stores they are placed in, what shelf they go on and how much space they have (And the dark side of grocery segmentation is when stores in poorer neighborhoods do not sell the widest variety and best quality products, contributing to food apartheid.) Category segments for eggs, such as cage-free, organic and pasture-raised are now available at most grocery stores due to surging interest from consumers. Because they are a single ingredient product with multiple price and attributes segments, they can make it easy to help us understand how retail prices really work.
