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Why Do Cereals Cost So Much?




Whenever we begin a discussion of breakfast cereal, inevitably the first question heard is why to cereals cost so much? With prices approaching $5 a box for leading brands, it is no wonder that consumers are concerned about cereal prices. However, it is easy to avoid cereal sticker shock if you follow these two simple rules:

1. Always buy brand name cereal with a coupon. Cereal companies distribute some 25 billion coupons a year. More than 60% of brand name cereal purchases are made with a coupon. Because distributing, redeeming, and discounting for coupons is so expensive, cereal companies like General Mills are cutting back on the coupons. But consumers love them, so they will probably stick around for a long time to come.

2. Don't buy brand name cereals. Most supermarkets offer low priced store brand alternatives to the name brands. These cereals are not expensive. If you want to save money, buy them. Malt-O-Meal and Quaker have also introduced low priced cereals packaged in plastic bags instead of boxes.

Beyond these two obvious ways of saving cereal dollars, the big question remains. Is there a cereal conspiracy which is ripping off consumers? Rep Charles Schumer (D.NY) recently asked Attorney General Janet Reno to lead an investigation into the cereal companies to see why cereals cost so much. Thus far, Janet Reno's office has not given word whether or not such an investigation will take place.

In a modest effort to save our tax dollars, we urge Janet Reno not to launch an investigation. Here are selections of a letter by Bill Crawford which appeared in the New York Times on October 29, 1994.

"There is no conspiracy among cereal manufacturers to keep prices high.

"Investigators have tried for decades to uncover skulduggery in the cereal business. In 1915 Federal trust busters sued Quaker Oats for monopoly practices designed "to lay a nation's breakfast table under tribute." The court ruled in favor of Quaker Oats.

"In 1972 the Federal Trade Commission mounted another legal campaign against cereal makers, accusing them of collusion and vast consumer overcharge. After 10 years and 35,000 pages of testimony, the F.T.C. was poured out of court.

"The Attorney General of New York State is waging yet another courtroom battle against the cereal industry, which will undoubtedly prove once again that the selling of cereal is a tough and competitive business.

"Consumers are to blame for high cereal prices. Inexpensive, private-label cereals are widely available. They just don't sell well. People want more than a generic, wholesome breakfast from the cereal box - they want entertainment as well."

Since that letter was written, the Attorney General's case was decided in favor of the cereal manufacturers. According to the opinion issued by the New York U. S. District Court on February 22, 1995, "Over the 1989-1993 period, ready-to-eat cereal prices net of coupons (the price consumers actually paid) increased by 6.6 percent, while the food-at-home consumer price index rose 12.8 percent and the consumer price index for all items rose 16.5 percent."

The fact is that the high price of cereal is a myth - a widespread, beloved myth, but a myth just the same. Like Babe the Blue Ox or Pecos Bill's tornado ride, stories about high priced cereal have circulated among Americans since cereal was first introduced in the late 19th century. Luckily, we have yet to hear stories about albino cereal living in the sewers of New York. But cereal continues to be the stuff American consumers love to hate.

Are we being paid by the cereal companies to say this? We wish!! Please!! Unfortunately, this is just the truth, revealed after extensive research.

Send comments, and other cereal myths, to Bill Crawford.



Site reproduction by permission of Scott Bruce. "The Breakfast Cereal Hall of Fame" is a trademark of Scott Bruce and Bill Crawford. Original site design by Elijah Dean "Kaboom" Meeker.

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