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The Unhealthy Cost of Healthy Foods

Eating fruit and vegetables is good for you. It is expensive too.

Growing imports, a complex distribution network, and loss throughout the supply chain make the large variety of colorful and unblemished produce at the grocery store possible. Who pays the price? Those who can afford it. Those who cannot afford it pay with diet-related illnesses. The low costs of processed foods, advertising, and engrained eating habits play a role in diet inequality, but so do supply chain factors. How can waste be reduced along the supply chain?

Video Spotlight: Why Fruits and Vegetables Just Keep Getting Pricier (April 17, 2019, CBC News: The National)

This post is based on the CNBC article, Healthy Foods Are Often More Expensive. Here’s Why, by I. Karsit, December 27, 2023, and the YouTube video in the Spotlight. Image source: Brand X Pictures/Stockbyte/Getty Images.

Discussion Questions:

1. What are the reasons for the higher prices of healthy foods? Explain.

Guidance: The healthy foods in this article are fruit and vegetables. The primary reasons for their high prices are high costs. The costs include supply chain fixed costs; labor costs; reduced supply of produce due to climate change, untimely or careless harvesting, delayed delivery, long delivery lead times, and perishability; energy costs; and large inventories at retailers.

2. What are the supply chain fixed costs to deliver fruit and vegetables?

Guidance: The supply chain fixed costs include land purchase or lease, automated equipment to pick the fruit and vegetables, refrigerated warehouse rental, insurance on perishable cargo, supervisors’ salaries, workers’ liability insurance, high order costs due to product perishability, special infrastructure throughout the supply chain, and administrative expenses. In areas where demand is low (because of high prices), the fixed costs have to be distributed over a smaller quantity of items, further contributing to higher prices.

3. How can the supply chain costs be decreased?

Guidance: Growing global imports complicate the supply chain and increase its fixed costs. A logical solution seems to sell higher quantities of locally grown fruit and vegetables, but these usually cost more, and consumers have become accustomed to a high variety of produce available throughout the year. The primary driver of the high supply chain costs is the perishability and fragility of the items. Therefore, finding cheaper, indoor-growing methods (see video), selecting reliable and suppliers of high-quality items, improving handling procedures to lower damage, reducing distribution delays, decreasing average inventories at grocery stores, perfecting forecasting at the local retail level, and extending the freshness of fruit and vegetables with new technologies emerge as the most promising solutions to decrease supply chain costs.

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