The cheapest food in the world

Last night, I ate these:

Two things.
1, They didn’t look like that (bc no fast food looks like the picture).
2, They were delicious and legitimately $1 each.
I tried all the flavors.

Incidentally, if you happen to be in the market for a crunchwrap slider, I would steer clear of the BLT one. Beefy nacho and sriracha chicken were pretty good. (Anyone interested in an in-depth breakdown of the whole Taco Bell menu can email me)

Anyway, I tried all of the cruchwrap sliders. That scratched only one thing off my current list of fast food deals that are happening right now:

  • $1 crunchwrap sliders from Taco Bell
  • Pick 2 for $2 at McDonald’s
  • 5 items for $4 at Burger King
  • 2 or more pizzas for $5 each at Pizza Hut

Am I going crazy or are these deals ridiculous? I’m sure they give you tiny servings, but since when have you been able to get things for less than $1 each at Burger King? And the only $5 pizza I know of is Little Caesars’ Hot-N-Ready cardboard.

“No!!! Why?! Why?!”

The past few weeks, so many combo meal deals have been advertised that I’ve started asking, “Why?”

The idea of a combo deal isn’t new, of course.  The combo meal was first spread in the early 70s as an operational necessity for the rapidly expanding franchises of McDonald’s, Burgerking, and Castle.  Customers were taking too long to order from a list of items, so combo meals offered a pre-packaged way for customers to decide, order, and keep the line moving.

But why make them so cheap?  Usually, restaurants make their money off combos, because fries and a drink have crazy profit margins.  Now, it seems like restaurants have to be barely breaking even on these items.  In fact, franchisees are upset that the company makes them offer these deals, because the deals often lose money.

So why so cheap? And why do multiple restaurants offer similar deals at the same time?

Part of it is competition.  If McDonald’s offers a combo deal, you better believe Burger King is gonna offer something, too.  Nobody wants to lose market share.

From there, the meal deals proliferate.  Taco Bell has to keep up and stay in the public’s mind so they offer a $1 menu item.  Then Pizza Hut wants some of the action, too, so they pile on with a $5 pizza.

New Year, New Deals

Ok, but that still leaves the question of why January 2016 is special.

The answer is that 2015 was not a good year for fast food.  Companies like McDonald’s are used to more sales, more customers, and more stores every year.  The past two years, traffic was flat for fast food restaurants.

(Aside about the graph: McDonald’s sales are going down.  Basically, if the graph is above the red line, that means the company is doing better than it was doing at this point last year.  Below the red line, worse.  “Y/Y% change” means year-over-year percent change.  “Comp US store sales” means comparing a set of stores to themselves.

In practice, this means for instance that McDonald’s got the numbers from all their stores in February 2014.  In February 2015, they went back to all their stores and got the numbers again.  They then filtered out all the stores that opened and closed in the year between, so that they were just comparing the stores that were open in Feb 2014 to themselves in Feb 2015.  If you look at the graph, you’ll see that Feb 2015 shows a -4% change year-over-year in comp US store sales.  The same stores did 4% worse than the year before.)

Lucky for McDonald’s, they own Chipotle, and “fast casual” restaurants like Chipotle are the new gold standard for making profit.  “Build your own bowl” restaurants are growing while fast food stays stagnant.  In DC at least, I can think of several places that fit this “fast casual” model. Shop House (stir fry and noodle place), Noodles & Co. (noodles), Chop’t (made to order salads), and Potbelly (sandwiches) come to mind.

Fast food execs are upping the ante in 2016.  They’ve realized they can’t compete with the customization or the freshness of Chipotle, et al.  But they do have an assembly line that can produce food for cheap.  And they can beat Chipotle, et al. on price.

Price check

There are a lot of factors that contribute to the dollar menu’s low price point.  Each could be a Bulletin topic in itself.

First, the dollar menu and similar deals at Taco Bell, Burger King, Wendy’s, etc. are a loss leader.  Restaurants don’t make money on the dollar menu.  It just gets you in the door.  After that, they hope to sell you fries, drinks, ice cream, or larger items to make money.

Second, low worker wages keep overhead down.  Most restaurants also hire their employees strictly on a part-time basis, meaning they don’t have to offer benefits.  Even if these employees work 40 hours a week, they can still be qualified as part time.

Third, commodities are super cheap right now, and that brings us back to the “why now?” question.  These fast food places can afford these deals right now largely because of how cheap commodities are.  Before I wrote this, I didn’t really know what a commodity was, besides the fact that Eddie Murphy trades orange juice commodities futures in the movie Trading Places.

At their most basic, commodities are energy, metals, and grain/produce–raw materials that come from the earth.  Because oil prices are so low right now, it becomes cheaper to produce and transport grain and produce, driving those costs down, too.  On top of all that, some commodities like corn are already subsidized by the US government and aritificially cheaper because of it.

But isn’t there another side to the coin?  What are the real effects of cheap food, and can cheap food be a good thing, too?

The cheapest food in the world

Maybe this shouldn’t surprise me, but the United States has the cheapest food in the world compared to what its people make.  On average, Americans spend just 9% of their bugets on food.  This has dramatically decreased over time.  In 1960, we spent 17% on food.  In 1930? 24%.

This is by far the lowest food budget to total budget ratio in the world.  In Europe, they’re spending up to twice as much of their budgets on food.  At first, this might seem great, but some argue that the industrialization of food is detrimental to our health, environment, and society.  Here’s Michael Pollan, author of Omnivore’s Dilemma and In Defense of Food:

“Cheap food is an illusion. There is no such thing as cheap food. The real cost of the food is paid somewhere. And if it isn’t paid at the cash register, it’s charged to the environment or to the public purse in the form of subsidies. And it’s charged to your health.”

Even as we pay less an less for food, we’re paying more for fresh foods.  Here’s a graph to drive that point home:
So eating a diet of fresh foods may actually only cost you as much as what European countries are spending on food.  But we’ve become so accustomed to the low benchmark of cheap food, that it’s now not uncommon to hear people say, “It’s too expensive to buy vegetables!”

How much a dollar cost

In 2013, an article in the New York Post caused a stir when Kyle Smith asserted that the McDouble was the greatest food in human history.

For millions of people, the McDonald’s hamburger offers a predictable, affordable meal.  It’s high in protein, fiber, and calcium.  And since it’s available in over 14,000 locations in the US, it is bountiful.  In most of those locations, it costs ~$1.19.

The article got tons of critiques.  A response in the article argued the point this way, though:

Many huffy back-to-the-earth types wrote in to suggest the alternative meal of boiled lentils. Great idea. Now go open a restaurant called McBoiled Lentils and see how many customers line up.

I’m not convinced that the McDouble is the highest achievement of agricultural bounty.  I’m less convinced that the availability of food like McDonald’s, particularly for poor people, is right, but the fact is that it’s everywhere and delicious and cheap. It’s hard to argue against the logic of someone short on money and/or pressed for time eating McDonalds. In college, McDoubles and McChickens got me through many busy days.

American food culture

In many ways, the McDouble and the crunchwrap slider and the Whopper have been built to meet our American cultural values.  They’re cheap, “triumphs” of capitalism.  They’re fast for people who are busy.

Our food is a reflection of who we are.

The upsetting part to me, though, is that the foods that are iconically American–the hot dog, the hamburger–are meant to be eaten standing up and walking away.  They’re mass produced without heart.  American meals are not meals to share, and they’re not meals you savor.  We devour them, and then wonder why we’re left unsatisfied and ordering another.

Because $1 may be cheap.  But sometimes it also feels empty.

One thought on “The cheapest food in the world”

  1. It is great to see that you are contributing to the greater good—by making some of us think just a little. By the way, I had a class at the Y that ended at 1:30. As I walked home past McD’s I would buy 2 hamburgers (left over from the lunch rush) for 0.25. It is not just time that drives decisions, it is tiny budgets.

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