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Tuna fish query
Shaun, a loyal MR reader, asks:
I have something that is bugging me: I have noticed that the small tuna fish cans are cheaper, by the ounce, than the larger ones. This holds true with every brand and supermarket. This seems very counterintuitive to me; nearly every other food product gets cheaper as the quantity increases. I wondered if you could tell me what's going on here.
Could it be storage and spoilage costs, thereby making this the corollary of the vending machine question? Or is it price discrimination against families and in favor of single people? Or do single people never finish the can and thus they need a lower price as compensation, noting that you still have to cite storage costs to prevent arbitrage? Those are my quick reactions, can you do better?
Posted by Tyler Cowen on May 24, 2008 at 10:03 AM in Food and Drink | Permalink
Comments
Is it possible that the smaller cans contain more broth and less tuna?
Posted by: at May 24, 2008 10:24:48 AM
My first reaction was that there may be less competition in the larger can market. The smaller cans may have more suppliers, increasing competition and driving the price down.
Posted by: Mario at May 24, 2008 10:29:45 AM
I'm not sure that smaller packages are so uniformally more expensive per ounce. Certainly, the vast majority are but in the UK it is my experience that a significant minority (say a few percent) of product are more expensive in larger quantities. I had assumed this was due to the supermarkets taking advantage of peoples hueristic that larger was cheaper.
On a side note, meat and fish and deli products from the counter are almost invariably cheaper than those pre-packed despite it being (probably) being higher cost for supermarkets to provide them this way, think staff costs, but I suspect this is price discrimination aginst customers who want the convinience of just chucking something in the trolley.
Posted by: Sam at May 24, 2008 10:30:38 AM
This may just be a US phenomenon. I've never noticed it in the UK, and a quick check of Tesco online shows small cans priced slightly more as you'd expect.
Tesco Tuna Chunks In Brine 185g £0.64 (3.46 £/kg)
Tesco Tuna Chunks In Brine 400g £1.09 (2.73 £/kg)
Princes Tuna Chunks In Brine 185g £1.00 (5.41 £/kg)
Princes Tuna Chunks In Brine 400g £1.60 (4.00 £/kg)
Posted by: TheophileEscargot at May 24, 2008 10:32:53 AM
I think Sam probably has it. It's probably nothing to do with tuna in particular. People don't really have the time to calculate prices on everything they buy, so a retailer can probably get away with this if they don't do it too often.
I would guess more than single people, it might be aimed at retired people. Without kids at home, they don't need large quantities of food. They have plenty of time to work out unit costs. And they're probably exceptionally price-sensitive.
So, retailers might find it better to accept a smaller profit margin on some smaller unit goods to get their business. But probably they'd want to cycle it around different products so that the less price-sensitive buyers don't have time to figure it out.
Posted by: TheophileEscargot at May 24, 2008 10:45:50 AM
I always assumed the lower price for smaller cans had to do with the increased labor needed to open and drain two cans, as opposed to the work of opening and draining just one larger one. But maybe I'm just lazy.
Posted by: BC at May 24, 2008 11:20:33 AM
getting the water out of the tuna fish can basically sux. So, to have to do it twice for the same amount of tuna represents a big cost to the consumer. Hence, they will pay less for a smaller amount because double the amount causes two can openings and water squeezings.
Posted by: Eddie W at May 24, 2008 11:31:05 AM
My roommate noticed that at our local grocery store, toilet paper is cheaper per sheet when bought in 3-packs instead of 12. The heuristic is the only answer we can come up with, as spoilage and labor are clearly not a factor. Any thoughts?
Posted by: KHS at May 24, 2008 12:10:15 PM
I've been noticing this with tuna cans for many years, consistently. I always assumed it was due to demand: somehow I figure that 6-7 oz can just sells in much larger quantities. Maybe most tuna eaters eat alone? Who knows?
With other types of food/paper prods/liquid soap/etc., the ratio varies: the larger size is often but now always cheaper per unit vol. -- what I find odd is the permanence of this tuna fact.
Posted by: mae at May 24, 2008 12:16:47 PM
to compete with canned cat food? just guessing
Posted by: oops at May 24, 2008 12:19:37 PM
Perhaps very few people buy the large cans. Economies of scale might exist when making small cans that don't exist when making large ones. This would make small cans cheaper than large ones.
Leave half a can of tuna in your fridge if you want to "see" why small cans might be heavily preferred.
Posted by: Jason at May 24, 2008 12:21:48 PM
Ever since being tipped off by a yankee economics blog (perhaps this one?) I've kept an eye on the British shops. Routinely the big Mars bars cost more per oz than the little ones.
Posted by: dearieme at May 24, 2008 12:52:07 PM
Wendy's chilli was like this. I think it had something to do with people having insufficient math skills.
Posted by: Wendy at May 24, 2008 1:08:28 PM
Small cans of tuna are "loss leaders" which grocery stores use for advertising purposes. It is one of a couple dozen items that most chains will feature on their weekly ad sheets that appear in your newpaper and mailbox.
The 3-pack price on toilet tissues notes by KHS is a similar instance.
Posted by: Bob Knaus at May 24, 2008 1:27:27 PM
Could it be that the small cans are filled with smaller chuncks and the large cans with larger chuncks of fish? Don't like fish, but have noticed this for bacon, where I have always assumed that large bacon strips are harder to produce, while small blocks can be made from various waste cuts.
Posted by: Daran at May 24, 2008 1:30:00 PM
I think it has to do with people's buying patterns rather than cost...
McDonald's chicken Mcnuggets are the cheapest with the 4-pack off of the dollar menue (even cheaper than the family 20 pack)
It has been like that for many years.. yet I still see people buying larger sizes..
Posted by: Geoffrey at May 24, 2008 1:33:02 PM
Price discrimination against stupid people. Most cereals are cheaper in the smaller size at Wal*Mart. I bet in Wal*Mart actually I could find at least 100 products where this is the case, but they get mad when you start taking pictures of everything.
Posted by: Paul N at May 24, 2008 2:00:51 PM
I think nobody has it quite right. One reason is probably one of portion cost -- tuna 'bits', suitable for small cans are cheap becuase they're probably mostly fall-off from other avenues of production. On top of that, speaking from experience, I would never buy a large tuna can, because I'd never finish it. There are people who do, and I imagine their demand to be more inelastic than mine. I'll consider buying a small can, but only if it costs me roughtly 70 cents, if not, then I'll head straight past that shelf. Conversely, if I had a party, and planned to make a twelve-foot long tuna sub, I'd pay quite a premium for a big can, just to not have to open a lot of little ones. Basically, the two sized are subject to different demand functions (whatever economese for that might be).
Posted by: Gamut at May 24, 2008 2:37:52 PM
Could it be that small cans are for people who do not know that big chunks of tuna are better ?
Posted by: Hans Suter at May 24, 2008 2:39:19 PM
A few years ago my local Wegman's grocery was selling one liter bottles of flavored, carbonated water for $.50, and they were selling the same stuff in 1/2 liter bottles for $.59 each. Same product, same shelf. So the larger product was literally cheaper than the smaller product. Eventually they repriced these to make the large bottle cheaper, though it still remains less per ounce for the large bottle.
Posted by: liberalarts at May 24, 2008 2:42:50 PM
I've noticed this recently for many products. I suspect it might be a hangover from the bulk-buying fad that happened a few years ago. Now, there's a lingering impression that bigger is a better value, and people don't have time to check the price. I've even seen it with silly things like the two Listerine bottles that are shrinkwrapped together.
Posted by: Ansel F at May 24, 2008 3:44:17 PM
I've noticed this recently for many products. I suspect it might be a hangover from the bulk-buying fad that happened a few years ago. Now, there's a lingering impression that bigger is a better value, and people don't have time to check the price. I've even seen it with silly things like the two Listerine bottles that are shrinkwrapped together.
Posted by: Ansel F at May 24, 2008 3:45:06 PM
I have observed the same phenomenon for Basmati rice in London. I regularly buy Basmati rice produced by Tilda. It's quite common and usually sold in 500g, 1kg, 2kg, 5kg, and 10kg bags. In the big supermarkets the per unit price is declining with the size of the bag as you would expect. However in small corner shops I often notice that the unit price for the smallest bag ( 500g ) is lower than that of the next biggest bag ( 1kg ). I've always found this rather puzzling, even more so than the tuna case. The quality of rice is perfectly homogeneous across bag sizes. Also it is just as easy to transport and store two small bags as one big bag.
Two possible explanations come to mind. People shopping for 1kg bags in corner shops are in a hurry and do not compare prices. Maybe they expect the same pricing pattern as in their supermarket. This would then allow shop keepers to lower the price for the small bags to induce more low valuation customers to buy rice.
Another possibility is that shops want to discourage customers from buying bigger bags. That might be the case if it induces more visits to the corner shop coupled with purchases of other goods such as sweets or alcohol. If you only go to the corner shop once you've run out of rice, this strategy might work.
Posted by: authe at May 24, 2008 3:49:41 PM
It's interesting to see what happens when someone gives what's obviously the correct answer. The following posters simply ignore it. Here, Bob Knaus tells us what should have been in front of our faces: small-can tuna is a loss leader that is heavily advertised in order to bring shoppers into the store. Yet we have nine posts after his that don't even acknowledge it.
Posted by: Bloix at May 24, 2008 4:18:30 PM
I think it has to do with the mechanics of canning tuna.
most of the higher quality tuna seems to be cut out of a can-thickness sheet of the fish in the shape of the can. Think about the wastage from cutting round biscuits out of rolled biscuit dough... smaller cans leave less waste in between, or perhaps they nest in between the voids left by the larger cans.
then drop the biscuit-cutter analogy and think about wooden boards: longer boards can cost more per foot because fewer are of the quality needed to make one unblemished piece.
So rather than thinking of tuna cans as a quantity of tuna flesh, think of them as containing cuts of the tuna itself: larger pieces of a given quality are in shorter supply.
Posted by: Barrett at May 24, 2008 4:47:34 PM
