The McRib is back.
People wonder though, why McDonald’s doesn’t just leave it on the menu. The reason might be how we perceive that extra bite.
Have you ever seen one of those newspaper devices where you put your money in and the top opens to reveal 10 or so NY Times? People, though, take only one and snap the lid shut. Logically, we take no more than a single paper because the second one has little usefulness. Or, as an economist would say, the marginal utility diminished. The second newspaper had much less usefulness than the first one.
For the McRib, one McDonald’s franchisee explains that when the McRib first returns, he sells close to 200 a day. However, by the end of the promotion, anticipation plummets and his daily McRib sales drop to fewer than 50. In other words, similar to that second copy of the NY Times, McRibs buyers are displaying diminishing marginal utility. After their first sandwich, they rarely return for more. Then though, if McDonald’s delays the McRib’s return, excitement again builds as consumers look forward to their first bite. This year, they said the McRib would return during October and then the date was postponed to December 17.
Sources and Resources: As Freakonomics economist Stephen Dubner explains it, McDonald’s just has to wait long enough for him to forget how bad it is. Here, a great analysis of McDonald’s strategy says it is all about arbitrage that is based on hog prices. Also, you might enjoy ths Businessinsider slide show of “11 Amazing McRib Facts” and this NPR interview of the McRib’s inventor. For example, the McRib sandwich contains 70 ingredients.
Announcing the cancellation of this year’s bacon eating contest, Major League Eating (“the world body that governs all stomach-centric sports’) said, ”We cannot, in good conscience, allow [top ranked eater] Joey Chestnut to eat bacon during a global pork shortage,…We estimate that Joey alone could eat 20 pounds of bacon in 10 minutes of competition.”
Where is the pork shortage?
First stop, the US:
- Skyrocketing corn prices make feeding pigs so expensive that farmers are killing their livestock. Actually, we have a pork glut now–up 31% between last August and this August according to the USDA. But less livestock will probably create a shortage during 2013.
Next, the European Union:
- Britain’s National Pig Association (NPA) reports steep declines in Poland’s, Sweden’s, and Ireland’s pig population. Compounding the problem, in the UK, the NPA says sow herd size will probably drop by 20%.
And finally, China:
- With global pork prices ascending, will China need even more inventory for its Strategic Pork Reserve (SPR)? Created during 2007 after porcine blue ear disease diminished the Chinese pig population, the SPR continues to stock hundreds of millions of pounds of frozen pork that are ready for release when prices spike. (But, according to the NY Times, frozen pork only lasts 4 months so maintaining the supply is more complicated than just keeping frozen meat.)
This returns us to the bacon eating contest cancellations. With pork so pricey, pancake contests are getting more publicity. Here, an economist would point out the unintended consequences. Who would have thought that a congressional ethanol mandate could have pushed corn prices upward, the pig population downward, and led to more pancakes???
Sources and Resources: My information on pig populations came from a Foreign Policy blog, a Washington Post blog, this Huffington Post article, and on China’s SPR, here. To describe Major League Eating, I used their publicity.
Posted by: adminEcon
Tags: animal feed, bacon eating contests, bacon shortages, China, corn, demand, ethanol, Major League Eating, National Pig Association, pancakes, pig populations, Poland, pork prices, Strategic Pork Reserve, supply, Sweden, UK, US