Salad Bar Economics

Mar 22, 2011 • 294 Views
EST. TIME TO READ: 2 minutes

Sometimes a salad bar is about much more than lunch. According to the NY Times Magazine, it can also be about value when you compare the salad bar to the produce aisle.

If, as at the Whole Foods in Manhattan, you pay $7.99/lb. for your salad, you should avoid romaine, cucumber, carrots, beets and grape tomatoes. Why? At the same market, you can buy a cucumber for $1.49/lb. or carrots for $1.60/lb. in the produce section.

On the other hand, lots of bacon bits would be ideal because they typically sell for $21.28/lb. (Interestingly, the Times found no bacon bits at the salad bad.) Add some sun-dried tomatoes and maybe crumbled Gorgonzola and almonds? The first is $9.99/lb. on the store’s shelves, the second, $8.67/lb. and the almonds are $9.99/lb. As for lettuce, mesclun would be your best bet ($7.99/lb.) The result is a value-laden salad composed of sun-dried tomatoes, Gorgonzola, almonds, mesclun and maybe bacon bits.

If calories matter more than value, though, you might have to recalculate.

The Economic Lesson

Periodically, certain competitive market structure become more concentrated when businesses combine and less concentrated when subsidiaries are sold. In 1901, as the first billion dollar corporation, a combination of steel related businesses became U.S. Steel. In 2001, Sarah Lee “spun off” a division that, as an independent business, became Coach.

When does it make sense to combine or divest?

The answer is SOTP, Sum of the Parts. If the whole will be worth more than the sum of the parts, then a business should buy the extra enterprise. But, when the sum of the parts together is less than the total separately, then sell.

And, this returns us to our sun-dried tomato, almond, Gorgonzola, bacon bit salad.

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