Why are extracted properties of food often cheaper than the whole food?

Question

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

Answer 1

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.