FACTORS INFLUENCING COST

15. Certain factors that enter into the production of food add so much to the cost that they must be taken into consideration when food is purchased. The housewife who disregards these factors fails in the purchase of food, for she does not know so well what foods to buy nor how to buy them in a way to keep down the cost as the woman who is familiar with these matters. It is possible that the cost of a food may be out of all proportion to its value because of the profits that must necessarily be paid to each person through whose hands the food passes. In the first place, the overhead expenses of the food dealer must be paid by the housewife, who is regarded as the consumer. These expenses include his rent, light, and heat, his hired help, such as clerks, bookkeepers, delivery men, and the cost of delivery. In addition, the cost of transportation figures in prominently if the foods have to be shipped any distance, the manufacturer's profit must often be counted in, and the cost of advertising must not be overlooked. With all such matters, the housewife must acquaint herself if she would buy in the most economical way.

16. CHART OF FOOD PROBLEM.--To assist the housewife in her mastery of the purchasing side of the food problem, a chart, Fig. 6, is presented. This chart shows the various routes through which foods travel before they reach the housewife, or consumer. The lines used to connect all dealers from the producer to the consumer represent transportation or delivery, and the increase in cost due to overhead expense and profit is indicated by the black spaces, which increase in size as the number of dealers increase. The producer may be the manufacturer, but in most cases he is the farmer, the stockman, the dairyman, or the fruit grower. The dealers handling the food between the producer and the consumer are known as middlemen. They include the wholesaler, the jobber, and the retailer. The retailer is the grocer, the butcher, or the green grocer.

17. So that this chart may be clearly understood, several concrete examples are given. Thus, the farmer who delivers vegetables directly to the consumer is an example of plan No. 1. He has very little overhead expense and consequently can sell cheaper than dealers who have a large overhead expense. However, when the farmer delivers his vegetables to the grocer and the grocer sells them to the consumer, an example of plan No. 2 is afforded. Food bought in this way costs more than that bought directly from the farmer. In plan No. 3, the farmer, for instance, sells his vegetables to a wholesaler, who perhaps buys from other farmers and then sells small quantities of them to the grocer for sale to the consumer. This plan, as will readily be seen, is more involved than either No. 1 or No. 2, but a still more roundabout route is that of plan No. 4. In this case, for instance, the farmer sells his vegetables to a canning factory, where they are canned and then sold to the grocer, who sells them in this form to the consumer. Often two wholesalers, the second one being known as a jobber, are involved in the transaction, as in plan No. 5. In such an event, the farmer sells to the wholesaler, who sells to the jobber, who, in turn, sells to the grocer, from whom the consumer secures the goods. The most complicated route is that shown in plan No. 6. This illustrates the case of the farmer who sells his cereal products to a manufacturer, who makes them up into breakfast foods. He then sells them in large quantities to the wholesaler, who sells them in 50- or 100-case lots to the jobber. From the jobber they go to the grocer, who delivers them to the consumer.

From a study of this chart, it can be readily seen that the cost of food may be reduced if the middlemen can be eliminated. For instance, the housewife will be able to get fruits and vegetables cheaper if she buys them from a farmer instead of a grocer, for she will not be called on to pay any of the grocer's overhead expense or profit. Again, if she buys her staple groceries in a store that is able to eliminate the wholesaler or the jobber, she will get them at a lower price than if she deals where these agencies must receive their share of the profits.

18. NATIONALLY ADVERTISED GOODS.--Much is said about the fact that the consumer, in buying package foods that are nationally advertised, must pay for the package and the advertising. This statement is absolutely true; but it must be remembered that where large quantities of foods are handled, the materials can be bought by the manufacturer or the wholesaler at a lower price than by one who purchases only a small amount. Then, too, if great quantities are sold, and this condition is made possible only through advertising, the profit on each package sold can be much smaller than that which would have to be made when less is sold. Often, therefore, in spite of the advertising cost, a widely advertised food can be sold for less than one that is not advertised at all because a much greater quantity is sold.

19. CHAIN STORES.--The principle of selling great quantities of food at a comparatively small profit on each item is put into practice in chain stores, which are operated by different companies throughout the United States. Such stores are a boon to the housewife who must practice economy, for they eliminate a middleman by acting both as wholesaler and as retailer. Because of this fact, foods that are purchased in large quantities from the producer or manufacturer can be offered to the consumer at a lower price than in a retail store not a part of a chain. Therefore, if foods of the same quality are not lower in price in chain stores, it must be because the buying is not well done or a greater profit is made in selling them. In addition, chain stores generally require cash for all purchases made in them and they do not usually deliver goods. Consequently, their overhead expense is materially reduced and they do not need to make such a large profit.