Everyday Economics: The Contents of Refrigerators, Supply and Demand, and Global Markets

What Refrigerators Can Tell Us About Global Markets

by Elaine Schwartz    •    Aug 12, 2014    •    310 Views    •    TIME TO READ: 1 minute

After a look inside a refrigerator, you might be able to form some economic conclusions. In emerging markets, the contents of refrigerators provide clues about affluence.

Climbing up the development spending ladder, households can afford a refrigerator starting with the $3,000 GDP rung. As we saw last week, refrigerator ownership in China is soaring with the household total now close to 88%. A second BRIC, Brazil, is higher with numbers above 90% while India remains at 27%.

You can see (below) how refrigerator ownership has risen in Brazil with China close behind.

Supply and demand in developing countries

From: AllianceBernstein

 

Based on one investment analyst’s peek at 70 refrigerators in 12 emerging market countries, we could decide whether a refrigerator belongs in India, China or Brazil. An Indian working class family’s refrigerator would have mostly “efficiency items” such as eggs, fruits, vegetables and some pre-cooked food. Several steps higher, middle class households in China are starting to add some “indulgences” like alcohol, chocolate and ice cream. Then, at the top, perhaps in Brazil, the difference is the addition of health foods.

Supply and demand shown by refrigerators in developing countries

From: AllianceBernstein

 

Where are we going? To use chocolate as an example of how the items in developing countries’ refrigerators will affect us.

According to a confection industry website, chocolate consumption in developing countries is indeed growing. Not close to Switzerland where the average person downed an average of 240 candy bars in 2012, Russia is the only developing nation in the world’s top 20 chocolate eaters. But, with China’s growing affluence, its current level of 2 chocolate bars per person per year is expected to soar. Similarly, the number of refrigerators stocked with chocolate in Brazil and India will rise.

And that takes us to our own refrigerators. Because increasing chocolate demand from developing nations is helping to elevate cocoa costs, Hershey’s announced a price hike. As a result, we might have less chocolate in our refrigerators.

Our bottom line: In addition to chocolate, as people in developing nations eat more meat and dairy products and need more energy for their refrigerators, changes in supply and demand will affect global markets.

Sources and more...I thought it was interesting that the 70 refrigerator study I referenced was from an analyst who was identifying the consumer product firms that would benefit from changes in supply and demand in developing nations. Because the confection industry study I cited was also not from an academic source, I am not positive about the statistical accuracy of my first source and this one. However, their broader conclusions have been supported by more rigorous data. By contrast, my chocolate price information was statistically sound.  

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