For example, olive oil and olives, or orange juice and orange. Why is the extracted property of the food cheaper than the food itself?
In: Economics
Because we want olives and vegetables and such to look nice. The oranges which are pressed to make juice don’t look as nice as the ones you buy. Therefore the oranges you buy are more expensive.
Also, transporting orange juice is cheaper than transporting oranges. After all the oranges must still look good when they arrive at the store.
For produce, it’s because the nicer-looking fruits and vegetables get sold as themselves and the uglier ones get turned into juice. Or because there are some varieties that are harder to grow but look/taste better as whole fruit and there are some that grow better but are better for processing.
For other foods it’s often because the processed version is a byproduct of producing something that sells for more. So for example they’ll take a whole chicken and cut off the breasts, sell those separately, and reprocess the rest of the carcass into chicken nuggets or whatever.
They either sell the other byproducts as organic fertilizer or they use the byproducts to make something else. In the example of orange, the peel and part of the juice can be used to make marmalade.
Storage & transporation costs. Olive oil can sit at room temperature for a long time; olives spoil when not packaged properly. Orange juice and oranges, same. You’d have to refrigerate oranges and keep them safe from bugs and light for a while, including in transport. Orange juice, you can dehydrate the orange, transport the dry powder, mix it with water at the destination, and sell.
I have to imagine a lot of this is that the individual item is less desired, more difficult to transport, store (not as shelf stable), and overall more difficult a product to manage.
For example your example of oranges, you can’t easily pack oranges in a space where they’re efficient in taking up space and not all squishing each other, they rot quickly in comparison to OJ, etc. Think of all the R&D that’s gone into making the end product and how fine tuned for cost efficiency and savings it is – you can’t do that with just an orange. I might be off, and I questioned myself even a little while typing this. Hopefully someone else is smarter and can explain it to us both better.
Have a good day.
You compare costs at the store for a product to get there you do not just need to produce it but alos transport it. Both olives and oranges will take up more space than the liquid you can get from them, olive oil does not need refrigeration. It is not uncommon that orange juice gets concentrated ir water is removed when it is made and then water is added when it is bottled closer to the store, which makes a huge difference in transportation costs. It can alos be frozen and stored, it can then be tawed and mixed with water and sold when oranges are not in season in one location. the cost is higher and you might need to transport them even longer
It is not just transportation, the required handling is different, you can just dump a large container into the machine that extracts the liquid and it can be bottled automatically. The fruit needs some human interaction.
It is alos not exactly the same product. Oranges you get in the store are nice looking ones but if you make juice of them you can use the ones that do not look as nice because the taste does not differ. Oranges that do not look as nice will not sell as well in a store and there is a huge risk the will get bad and need to be discarded. There is a lot of waste of produce in stores because they get damaged, get too old, etc so there are losses that result in the one that are sold costing more.
This all assumes the store charges the cost to produce, store, handle etc the product with a fixed profit. That is not what stores do, they typically price produce based on what maximizes profit. People are prepared to pay more for oranges than orange juice so they charge more for the oranges and make more profit. It is not just stores but supplies and distributors too.
There are multiple reasons for this.
first of all these processed products are often made from lower grade fruits and vegetables which can be bought for lower prices.
That does however not mean that the products are worse overall, they simply buy stuff that doesnt look good enough to be sold individually.
Beside this they are also buying in bulk so its cheaper once again and last but not least many of these processed variants are shelf stable or simply last much longer overall in their processed form so they can be transported more easily.
This is also why even things like frozen veggies are often cheaper than fresh ones, they are processed and frozen in peak season when there is a lot of supply and then simply get sold over many months.
One aspect that people haven’t mentioned so far is that a lot of the time they are blends of different varieties and produce from different areas.
For example, food manufacturers can take one variety of orange from California and South America and then mix it with different varieties from Italy or Spain. The manufacturers analyse the contents of the different varieties and can then mix them in different proportions to get a consistent flavour.
Now if the manufacturers weren’t to do this they would run into a few issues. Firstly, if you only use one variety of orange that is grown in Spain but there might be a disease that spreads that year which reduces the crop yield, resulting in less juice being made this year.
Secondly, if you are able to get the same yield in crops but the weather conditions are different in one year. This might result in the sugar content of the oranges changing enough where it makes the flavour change each year.
Food manufacturers require/love consistency in their products and one for the ways they get around this is by using a wide variety of food from different locations.
In addition to other reasons mentioned: If I sell the whole orange, I sell it once.
Or I can squeeze the juice out and sell the orange juice.
Then I can run the peels through a distiller and extract the limonene in the peels and sell that as a degreaser.
Then I can sell the peel pulp as livestock fodder.
So I sell the orange 3 times instead of once. That gives me enough margin that I can (and probably need to) lower the price to be competitive with other orange processors/providers.
First, the ugly, oddly shaped, etc. produce can be used for oil and juice while the ones sold to end consumers are selected for nice shape and size. Additionally, much of the cost of produce is the cost to transport it, store it, stock it, and sell it without it becomming damanged or spoiling/rotting. And still a good percentage of produce does go bad before being sold and that’s built into the price. You’re not just paying for the orange you do buy, but for the 20% that get damaged or spoil and can’t ever be sold. But something like olive oil or orange juice can be packaged and sterilized in a way to preserve its shelf life much longer than the fresh produce lasts so there isn’t that produce loss.
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