General Question

SergeantQueen's avatar

How have Arizona tea cans remained 99 cents despite inflation?

Asked by SergeantQueen (12739points) 2 months ago
6 responses
“Great Question” (2points)

Emphasis on Cans because the bottles have gone up.

They are literally the only thing I buy that hasn’t gone up, and I do mean literally.

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RedDeerGuy1's avatar

Edited

Seeing as it is made from sugar, tea and water, and $0.05 – $0.10 can, I wonder why It is not cheaper. My guess is that the grocery store is eating the cost for more foot traffic. Also like when Costco eats the cost of rotisserie chicken.

Bananas are $2 a bunch at my grocery stores despite they travel across the globe, and inflation.

Also Costco rotisserie chicken is still around $5.

gorillapaws's avatar

This is a guess, but I don’t think @RedDeerGuy1 is that far off the mark. Essentially the cost of the tea to produce is such a small part of the overall price that even if their costs rise slightly, the decline in sales by raising the price would be overall less profitable than taking a small hit on profit margins.

elbanditoroso's avatar

In general, merchandise costs are not based on materials or production costs. (They are to an extent, but not as much as you think.)

Retail costs are based on the manufacturer’s perception of “how much can I charge without losing sales”?.

So in this case, the store and the manufacturer have decided (probably because of competition) that they don’t have the ability to raise prices, because they will lose sales as a result. So the price stays low.

The beverage market is highly competitive. Arizona Tea is probably not making much profit per can. But they likely feel is is better to sell something and make a little money, than sell less because they charge too much.

LadyMarissa's avatar

The head of the company was on the news over the last couple of months. He says he is adamant about keeping the price at 99¢. I don’t remember his reasoning, but he was steadfast on that subject. That’s why the 99¢ price is stamped on the can…the store can’t raise the price behind the manufacturer’s back.

Strauss's avatar

Was it overpriced to begin with?

elbanditoroso's avatar

@Strauss quick answer: Yes. Ingredients are something like 4 cents/can. Can itself is about 2 cents. Packing and transportattion approx 15 cents/can.

So the margin (to the manufacturer) is something around 75 cents/can.

Figure that the retailer adds in his profit margin on top, let’s say 25 cents/can.

Profit is still 50% of costs.

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