I just paid $2.60 for 24 packs of ramen. I’m trying to figure out why it is so cheap compared to say normal noodles. What makes them different and so much cheaper?
It is a good question and one I have pondered myself. I used to work in the supermarket industry so I understand pricing and margins fairly well. However, I also understand supply chain costs as well and I never figured that one out. The cost of making it is only one cost. I believe the fact they can make them for less than 10 cents. However, then they have to package then, market then at the manufacturers end, take orders, put them on a truck, the supermarket most receive them, they have to be put on the shelf, there are damages etc. The supermarket itself has people at headquarters negotiating price, finance has to pay for it and account for them in many different ways. You have people doing spreadsheets of sales trends etc.
If I had access to my old data, I could give you numbers. Something tells me that stores don’t make much or anything on it but they carry it because people expect them to.
Well, they actually *do *have a shorter self life.
They might make very little on the actual sale (maybe $0.75) but make up a lot on a slotting fee.
What’s a slotting fee?
(Forgetting all the prostitution jokes that present themselves).
Can’t resist: Twenty bucks - just like downtown.
A slotting fee is what the manufacturer (or distriutor) pays to the supermarket to carry their goods. In other words, the folks at your friendly supermarket aren’t just carrying ramen because they believe their customers want it, they’re also carrying it because the ramen companies pay them to.
Walk through the aisles sometime and look at the hotly contested product categories: cereal (Kellogg’s vs. General Mills), soda pop (Coke vs. Pepsi), cookies (Keebler vs. Nabisco) etc. When you see three rows of Pepsi 12-packs and one row of Coke 12-packs, that’s slotting fees at work.
Heh. I’ll skip the tasteless joke, Belrix– no matter how tempted I am.
Slotting fees are generally lump sums paid by to (usually larger) chain stores to secure product placement in the stores. These can be fairly large sums. Let’s say I make the best damn chili north of Texas (I do!), and want to mass produce and market it. I can sell it through niche markets (small stores, farmer’s markets, etc.) or I can pitch it to the chain stores, who will extract a fee to cut it into the store’s shelf set. These can be sizable sums, and the chains are merciless (and unfortunatley need to be to remain competitive) about discontinuing underperforming items in the shelf sets. If it doesn’t move at a reasonable rate–it’s toast. The initial fee usually covers a set time period for the product to prove its worth. After that, it better turn at a decent clip or it will be discontinued.
Shagnasty–what chain did you work for, if I may ask? I worked in chain operations for almost ten years in MA before moving to VT.
And kunilou is correct–when you see one measly facing of your favorite cereal, and three or four of Spongebob Squarepant’s Chocolate Frosted Sugar Bombs, that is indeed slotting at work. ::sigh::
I was a buisness systems analysts for Star Markets and then moved to Shaws supermarket headquarters after Star was aquired.
My specialty was automated purchasing systems and forecasting.
Do you want ramen dealers to read this and say “Hey, ronincyberpunk’s right! I could sell this for far more!”
Please try to be more careful when posting. Walls have ears.
Wild guess, but maybe they’re so cheap because worldwide demoand is so high, and they’re so easily made that the market is crowded with manufacturers. JillGat wrote a mailbag article on them a while back:
Wholesale price of twelve and a half cents? Don’t need to mark it up much for a profit. And if you do, there will be a lot of clone companies who will undersell you. Top Ramen knows what they’re doing with their pricing.
Ramen noodles and Natural Light beer. My diet during all four years of college