Supply and demand
AUSTIN, Minn. – The economy is in tatters and, for millions of people, the future is uncertain. But for some employees at the Hormel Foods Corporation plant here, times have never been better. They are working at a furious pace and piling up all the overtime they want.
The workers make Spam, perhaps the emblematic hard-times food in the American pantry.
But these days, consumers are rediscovering relatively cheap foods, Spam among them. A 12-ounce can of Spam, marketed as “Crazy Tasty,” costs about $2.40. “People are realizing it’s not that bad a product,” said Dan Johnson, 55, who operates a 70-foot high spam oven.
Hormel declined to cooperate with this article, but several of its workers were interviewed here recently with the help of their union, the United Food and Commercial Workers International Union Local 9. Slumped in chairs at the union hall after making 149,950 cans of Spam on the day shift, several workers said they been through boom times before – but nothing like this.
Spam “seems to do well when hard times hit,” said Dan Bartel, business agent for the union local. “We’ll probably see Spam lines instead of soup lines.”
Even as consumers are cutting back on all sorts of goods, Spam is among a select group of thrifty grocery items that are selling steadily.
Pancake mixes and instant potatoes are booming. So are vitamins, fruits and vegetables, preservatives and beer, according to data from October compiled by Information Resources, a market research firm.
“We’ve seen a double-digit increase in the sale of rice and beans,” said Teena Massingill, spokeswoman for the Safeway grocery chain, in an e-mail message. “They’re real belly fillers.”
Kraft Foods said recently that some of its value-oriented products like macaroni and cheese, Jell-O and Kool-Aid were experiencing robust growth. And sales are still growing, if not booming, for Velveeta, a Kraft product that bears the same passing resemblance to cheese as Spam bears to ham.
Spam holds a special place in America’s culinary history, both as a source of humor and of cheap protein during hard times.
The company would not discuss more recent sales of the product or permit a tour of the Spam factory, citing rules that Hormel said prevented it from speaking ahead of a forthcoming earnings report.
However, Hormel executives appear to be banking on the theory that Spam fits nicely into recession budgets. Workers on the Spam line in Austin – more than 40 of them work two shifts – see no signs that their work schedule will let up.
“We are scheduled to work every day except Thanksgiving and Christmas,” said Darwin Sellers, 56, a Spam “formulator” who adds salt, sugar and nitrates to batches of Spam. “Mr. Ettinger is negotiating with the man upstairs to get us to work eight days a week.”
Q1. Identify the market force (supply or demand) featured in this article.
Q2. Identify the shifter (determinant) of supply of demand at work and its effect on price or quantity of the good/service.
Q3. Explain how a supply and demand graph works. Based on what you learned about Spam in this article, how would you present Spam on a supply and demand graph?
Q4. Name a related good or service not mentioned in the article and explain one impact of the proposed change on the market (price and quantity) for that product.