Category: Food and Drink
Ben emails me:
Could you please consider and comment on some of the unseen consequences of local price caps on restaurant delivery services? (Politico article describing the phenomenon in SF, NYC, etc.) A highly competitive market for such services exists between GrubHub, DoorDash, Uber Eats, etc. Moreover, patrons can always pickup and restaurants can always hire their own drivers. That dynamic market will keep prices down and improve service quality and value. As reported 2 days ago, 5/13/2020, in the Wall Street Journal, “America is stuck at Home, but Food Delivery Companies Still Struggle to Profit.” Yet many locals are considering regulating and limiting the prices that such delivery services can charge.
Here is a NYT article on the same phenomenon, claiming that some apps charge up to 40% of the restaurant’s take.
My first question is why the restaurants do not charge higher prices for customers using the app. That might be illegal in some localities, but surely that is not the general answer to the question. Rather the restaurants are afraid of losing customer good will — “what!? I have to pay 30% more just because I bought it with my phone?” [Plus the apps do not allow it, see the comments, though I do no think the apps could prevent restaurants from giving “extras” and thus lower prices to those who show up for service in the restaurant.]
In this setting, restaurants are losing potential revenue to avoid a reputational hit, and staying in business (rather than closing up) because they believe the value of their future reputational franchise is high. In other words, in both channels the restaurants perceive the value of their future reputational franchise to be pretty high.
That is the good news, although you might wonder how it squares with the generally low returns to running a restaurant. I suspect some restaurants simply know they are good and profitable because they are skilled, and the losers are overconfident and less well-informed.
One efficiency advantage of the apps is that they will put the unprofitable restaurants out of business more quickly.
The next question is whether some surplus from the profitable restaurants should, in the short run (and maybe in the longer run too?) be redistributed to the app company.
The apps should increase the demand for the food from the good restaurants (easier to order and arrange delivery), but lower the profit margin on selling more of that food. If those ingredients and kitchen capacity otherwise would go to complete waste, overall that seems like an acceptable bargain. Kitchens are kept active, which is an efficiency gain, even if some profit is redistributed to the app company.
In this scenario, you can think of the app as doing some of the selling, rather than the restaurant doing that selling, and reaping surplus from that effort. In essence, the business of the restaurant has become more specialized, toward pure food production and away from selling, that latter service now being performed by the app company.
Restaurants that were great at selling in the first place might be worse off. But it is far from obvious that these apps and their prices should be decreasing efficiency. Some other restaurants might be worse off because it is harder for them to carve up or segment the market, but that change likely is efficiency-enhancing.
And if the apps do indeed speed the bankruptcy of the lesser restaurants (presumably what the critics have to believe), over the longer haul prices will indeed go up and the good restaurants will earn back some of what they lost up front.
On net, consumers will have better services, better marketing, pay higher prices, and have a better selection of restaurants. That just doesn’t sound so terrible, or so necessitating government intervention to cap app prices.
Note that informed customers probably need the app least, so they are least likely to see its value, just as “critics” as a class, including restaurant critics, are also least likely to see the value of the app in marketing the restaurants. Of course this class of “critics” are exactly those who are most likely to be writing about the apps.
Tired of lockdown, pandemic, and rioting? Here is a podcast on some of their polar opposites, conducted by “a bridge and tunnel guy” with an accomplished sociologist. Here is the audio and transcript, here is the summary:
Ashley Mears is a former fashion model turned academic sociologist, and her book Very Important People: Status and Beauty in the Global Party Circuit is one of Tyler’s favorites of the year. The book, the result of eighteen months of field research, describes how young women exchange “bodily capital” for free drinks and access to glamorous events, boosting the status of the big-spending men they accompany.
Ashley joined Tyler to discuss her book and experience as a model, including the economics of bottle service, which kinds of men seek the club experience (and which can’t get in), why Tyler is right to be suspicious of restaurants filled with beautiful women, why club music is so loud, the surprising reason party girls don’t want to be paid, what it’s like to be scouted, why fashion models don’t smile, the truths contained in Zoolander, how her own beauty and glamour have influenced her academic career, how Barbara Ehrenreich inspired her work, her unique tip for staying focused while writing, and more.
Here is one excerpt especially dear to my heart:
COWEN: Let’s say I had a rule not to eat food in restaurants that were full of beautiful women, thinking that the food will be worse. Is that a good rule or a bad rule?
MEARS: I know this rule, because I was reading that when you published that book. It was when I was doing the field work in 2012, 2013. And I remember reading it and laughing, because you were saying avoid trendy restaurants with beautiful women. And I was like, “Yeah, I’m one of those people that’s actually ruining the food but creating value in these other forms because being a part of this scene and producing status.” So yeah, I think that’s absolutely correct.
COWEN: I have so many naive, uninformed questions, but why is the music so loud in these clubs? Who benefits from that?
MEARS: Who benefits?
COWEN: I find the music too loud in McDonald’s, right?
MEARS: Clubs are also in this business of trying to manufacture and experience what Emile Durkheim would call this collective effervescence, like losing yourself in the moment. And that’s really possible when you’re able to tune out the other things, like if somebody is feeling insecure about the way they dance or if somebody is not sure of what to say.
Having really loud music that has a beat where everybody just does the same thing, which is nod to the beat — that helps to tune people into one another, and it helps build up a vibe and a kind of energy, so the point is to lose yourself in the music in these spaces.
COWEN: Let’s say you sat down with one of these 20-year-old young women, and you taught them everything you know from your studies, what you know about bodily capital, sociological theories of exploitation. You could throw at them whatever you wanted. They would read the book. They would listen to your video, talk with you. Would that change their behavior any?
MEARS: I don’t think so. No, I don’t think so. They might not be too surprised even to learn that this is a job for promoters, and the promoters make money doing this. Most of them know that. They didn’t know how much money promoters are making. They don’t know how much money the clubs are making, but they know that they’re contributing to those profits, and they know that there’s this inequality built into it.
…in this world, there’s a widespread assumption that everybody uses everybody else. The women are using the club for the pleasures that they can get from it. They’re using the promoter for the pleasures they can get from him, the access. The promoters are using the young women. The clients are using the promoters.
The drawing line is when there’s a perception of abuse. People have a clear sense that lying about being exclusively romantic would be a clear violation, so that would be abusive. But use is okay. Mutual exploitation is okay.
Definitely recommended, a unique and fascinating episode. And again, I strongly recommend Ashley’s new book Very Important People: Status and Beauty in the Global Party Circuit, one of my favorite books of the year.
At Rasmus Persson and Linda Karlsson’s restaurant, you don’t have to order takeout, or wear a mask, or try to stay two metres away from the other patrons — because there are no other patrons.
It’s just you, seated alone at a table in a picturesque meadow in the Swedish countryside as you’re served a homemade meal that arrives in a basket using a rope and pulley.
It’s called Bord För En, which translates to “table for one,” and it opened on May 10 in Ransäter, a rural town some 350 kilometres west of Stockholm.
“We wanted to create a space that’s 100 per cent corona-free, as much as we could at least,” Persson told As It Happens host Carol Off.
And here is their Facebook page with further details and images. By the way, most of the customers are men. Then there is this:
When you book your reservation at Bord För En, you include a list of names of your close friends, and the restaurateurs then solicit one of them to write you a personal message.
It operates on a “pay what you wish” basis, and so far they have been heavily booked.
That is the topic of my latest Bloomberg column, here is one excerpt:
Demand for in-restaurant dining is likely to fall as well, though estimates vary. Since the average small business carries less than a month’s worth of liquid reserves, and the wait for a vaccine is likely to be at least a year, many restaurants will simply be unable to survive the shrinking of the market.
I call these places ghost restaurants because they are still walking around, so to speak, visible to us and listed on Yelp, but not really alive and without much of a future.
In a few months’ time, a significant number of these ghost enterprises will be gone. My drive around Northern Virginia, rather than being rich with culinary choice, will soon become fairly desolate — and the overall economic landscape will indeed be much emptier.
What else in our current capital structure might qualify as “ghost”?
And while an all-but-certain death awaits some businesses, others can look forward to mere stagnation. If you are a 23-year-old entrepreneur, how easy will it be to build up the network of “soft ties” that will help you launch the next phase of your career?
As many marginal businesses are going under, it is quite possible that the public-health situation will improve. Civic spaces will repopulate as commercial ones depopulate, giving urban landscapes a confusing feel. And because there will be fewer businesses to choose from, it will be all the harder for those remaining to enforce social distancing.
Many Americans have been clamoring lately for more freedom, and those desires are understandable. But as they emerge from lockdown, they might well be disappointed to discover that, above all else, what people will be exercising is the freedom to go out of business.
If you start by using the word “ghost” (better than zombie, in this setting), don’t be surprised if the column turns out a bit gloomy!
Middle and high school students to process lobster after temporary foreign worker ban
With lobster processing set to begin Sunday, desperate New Brunswick seafood plants are turning to high school and even middle school students to fill the gap left by temporary foreign workers.
The decision by the Higgs government to block foreign workers amid the coronavirus pandemic has left processors in the province saying they have only about half the workforce they need, while counterparts in Nova Scotia and Prince Edward Island are ready to go “full tilt.”
“[The province] pulled the rug from under our feet,” said Russel Jacob, owner of Westmorland Fisheries in Cap Pele…
Middle school students must have permission from their parents and will make about $13 an hour.
High school students will be paid about $15 an hour.
Jacob expects they will not perform nearly as well as the experienced foreign workers.
Here is the full story, via Eric Hendry.
My initial point of course was one about the value of immigrants. But might it also be said that a significant chunk of the rising unemployment in New Brunswick is voluntary? Admittedly not everyone is sufficiently able-bodied to perform the work, but if junior high school students can do it…that means that many of the unemployed adults are simply unwilling to take these jobs? Is one allowed to say that these days? It doesn’t have to mean the government should do nothing about the broader economic crisis.
Tear gas is among the new flavors at a Hong Kong ice cream shop.
The main ingredient is black peppercorns, a reminder of the pungent, peppery rounds fired by police on the streets of the semi-autonomous Chinese city during months of demonstrations last year.
“It tastes like tear gas. It feels difficult to breathe at first, and it’s really pungent and irritating. It makes me want to drink a lot of water immediately,” said customer Anita Wong, who experienced tear gas at a protest. “I think it’s a flashback that reminds me of how painful I felt in the movement, and that I shouldn’t forget.”
The flavor is a sign of support for the pro-democracy movement, which is seeking to regain its momentum during the coronavirus pandemic, the shop’s owner said. He spoke on condition of anonymity to avoid repercussions from the pro-Beijing government.
“We would like to make a flavor that reminds people that they still have to persist in the protest movement and don’t lose their passion,” he said.
He tried different ingredients, including wasabi and mustard, in an effort to replicate the taste of tear gas. Black pepper, he said, came closest to tear gas with its throat-irritating effects…
At about $5 a serving, tear gas ice cream has been a hit. Prior to social distancing regulations over the coronavirus outbreak, the shop’s owner said he was selling 20-30 scoops per day.
Here is the full story.
…the U.S. is, by far, the world’s largest producer of alcohol. That distinction is a result of the Energy Policy Act of 2005, which required fuel producers to blend four billion gallons of corn ethanol into their gasoline by 2006 and 7.5 billion by 2012. The immediate result was a spike in the price of corn and an increase in food prices world-wide. U.S. farmers soon solved this problem by diverting millions of acres of land to growing corn. Ironically, this increased overall CO2 emissions, much to the chagrin of the environmentalists who had championed the mandate as a way of fighting global warming.
Long before policy makers had seen their error, however, farm states had so fallen in love with ethanol that they successfully lobbied the federal government to raise the mandate to 32 billion gallons a year by 2022. Keep in mind that the oil industry would gladly pay billions of dollars in extra taxes each year not to use it.
The negative effects of this forced usage of corn-based ethanol in refined petroleum include higher gas prices (alcohol costs more than oil per British thermal unit) and more than 30 million acres lost to subsidized corn production — an area that vastly exceeds all the land lost to urban, suburban and exurban “sprawl” over the past century. And while the U.S. now has inordinate supplies of excess alcohol, fuel producers can’t use it, since adding any more to gasoline will damage car engines.
Surely now, with people clamoring for germ-sanitizing alcohol, this excess supply can be put to good use. Not so fast. The Food and Drug Administration and Bureau of Alcohol, Tobacco, Firearms and Explosives have prohibited the use of ethanol in place of isopropyl alcohol even though both are equally effective as germ-killers.
On April 3 the FDA announced that “ethanol made at plants producing fuel ethanol can be used as rubbing alcohol if it contains no additional additive or chemicals from the plants and they can ensure water purity and proper sanitation of equipment.” But it’s unclear how much supply will increase, since the FDA also stated that it would “consider each plant on an individual basis and grant approval only if a plant meets quality control specifications.”
Worse yet, the FDA reversed course on April 16, announcing additional restrictions that effectively prevent any sales, even though ethanol companies had already produced and shipped millions of gallons of high-grade alcohol for hand sanitizer. With U.S. ethanol inventories at all-time high of about 900 million gallons, you’d think the FDA would let us have a little for our hands.
That is the topic of my latest Bloomberg column, here is one bit:
The first wave of the Covid-19 pandemic brought serious economic damage for thinly capitalized face-to-face retailers, such as small family-owned restaurants. But many of those same institutions will lead the recovery — that is, if they have built up trust among their patrons. If they ask me to sit outside to eat my meal, I will trust that their kitchen procedures are “clean enough,” because I believe that the boss is watching [there I am referring to two of my favorite local places].
It is also worth asking whom I do not trust. When it comes to providing a fully clean and safe store, I do not trust most of the big-box retailers. I trust them just fine in ordinary times, but no single manager can oversee the entire cleaning and disinfectant operation. And can they monitor Covid-19 in the air? If they tell me that “all possible precautions have been taken,” I might believe their words, but I won’t believe that is enough.
The NBA is wondering if it can resurrect its playoffs at a dedicated location with television coverage but no audience in the stands. So far the teams are hesitant, in part because they are afraid of public resentment if the league’s millionaire players have access to Covid-19 tests while the general public does not.
The reality is that if the NBA announced it was buying up a lot of tests, it would boost the supply of tests. That could provide testing with valuable positive publicity, with the NBA serving as a role model for what other businesses might do. Yet the NBA does not yet trust its fans to see things in such a positive light, and so reopening is delayed. There might be some danger to playoffs games without fans, but surely less than in, say, collegiate or professional football, where injuries and concussions are built into the very nature of the competition.
Which are the businesses that you really trust in matters pandemic?
According to CNA, Tay is accused of leaving his home in Choa Chu Kang between 11:30am and 12pm, half an hour before his quarantine ended.
He thus breached his quarantine order by leaving his home to go to his neighbourhood shopping mall for breakfast without getting the permission of the Director of Medical Services, said the MOH release.
The day prior, Thursday, Apr. 23, 34-year-old Alan Tham was sentenced to six weeks’ imprisonment for breaching his Stay-Home Notice (SHN) to eat bak kut teh.
To be clear, I am fine with Singapore doing this, but it hard to imagine the United States enforcing quarantine with the same vigor. And on the other side, I might risk prison for laksa, but for bak kut teh?
For the pointer I thank Tuvshinzaya. and Jeet Heer asks:
I have to confess I’m becoming more pessimistic since I don’t see much signs that most countries outside Asia & the Pacific are developing the testing-tracing-isolation capabilities needed. Am I wrong about this?
Ashley Mears is an American writer, sociologist, and former fashion model. She is currently an associate professor of sociology at Boston University. Mears is the author of Pricing Beauty: The Making of a Fashion Model, and is regularly quoted in media as an academic expert in the culture and economics of fashion.
I am also a big fan of her forthcoming book Very Important People: Status and Beauty in the Global Party Circuit, which is one of my favorite books of the year.
So what should I ask her? Here is more about Ashley on Google.
Many shoppers have favored fresh and specialty brands over Big Food’s processed products in recent years, while others have opted for cheaper store brands. Now, the world’s largest makers of packaged foods say frozen pizza, pasta sauce, and mac and cheese are rising in favor as consumers in lockdown eat at home.
Nestlé SA NSRGY 3.04% became the latest to detail the trend Friday when it reported stronger organic sales growth for the first quarter driven by Americans stockpiling its DiGiorno pizza, Stouffer’s frozen meals and Hot Pockets sandwiches. Baking brands like Toll House and Carnation also performed well, it said…
Overall, U.S. store sales of soup rose 37%, canned meat climbed 60% and frozen pizza jumped 51% for the week to April 11, according to research firm Nielsen…
“We’ve seen time and time again that big brands tend to do well when people are feeling anxious and under threat,” Chief Executive Alan Jope said. He added that he expects the shift to larger brands to last a couple of years.
I wonder how general this trend is. I have seen data that readers are buying more long classic novels, and I am struck by my anecdotal observations of satellite radio. I am driving much less than before (where is there to go?), but per minute it seems I am more likely to hear “Hey Jude” and “In My Life” on the Beatles channel than in times past. Who wants to go out for their periodic 20-minute jaunt and have to sit through 6:34 of George Harrison’s “It’s All too Much”?
Here is the full WSJ story by Saabira Chaushuri. As for food, I am more inclined to consume items that can be easily shipped and stored, and if need be frozen. That favors meat and beans, and disfavors fresh fruit and bread. Frozen corn is a big winner, as are pickles. The relative durable cauliflower and squash do better than some of the more fragile vegetables, such as leaf spinach. I am not desiring comfort food per se, but I do wish to cook dishes requiring a relatively small number of items (otherwise maybe I can’t get them all), and that does almost by definition overlap with the comfort food category.
Nutrition labeling also frequently doesn’t comply with Agriculture Department and Food and Drug Administration guidelines for consumer sales, said Geoff Freeman, president and CEO of the Consumer Brands Association, a trade organization for the consumer packaged goods industry. A company that sold hamburger buns to major fast food outlets could try to pivot to retail, but that entails changing packaging on the fly, a relaxation of labeling requirements and new distribution contracts.
Here is a longer story, about how supermarkets are changing, by Laura Reiley, interesting throughout. I’ll say it again: America’s regulatory state is failing us.
You are going to be running to the refrigerator for snacks anyway, so why not make the most of it? Pickles are cool, fresh, delicious, and just the right size for snacking. At the same time, they are not too delicious, and they are pretty good for you, more so than say chips or candy. They store well too. I have been ordering from Number One Sons (kimchee too, and they deliver in my area), while one very smart reader (Alex R.) recommends Oregon Brineworks, especially the spicy ones.
Soon I’ll be turning to books and movies for your lockdown.
We recorded this two days ago on the spur of the moment, the discussion is still current, here is the transcript and audio, here is the CWT summary:
Tyler and Russ Roberts joined forces for a special livestreamed conversation on COVID-19, including how both are adjusting to social isolation, private versus public responses to the pandemic, the challenge of reforming scrambled organization capital, the implications for Trump’s reelection, appropriate fiscal and monetary responses, bailouts, innovation prizes, and more.
Russ is more optimistic than I am, here is one excerpt on the economic side:
COWEN: Well, two to four weeks [of shutdown], those are easy cases. If you think of many service sectors as having to shut down say until August, which is quite a possible scenario in some cases even later. That to me is greatly concerning and it may vary across sectors. So if you think about the NBA, whenever the NBA is ready to play games again, I mean the players will show up the next day and there’ll be ready, right? That will come back very quickly. But if you think of small businesses, say restaurants, the big chains aside, they’re typically thinly capitalized.
Let’s say a significant portion of those are gone forever. And then when things are somewhat normal again, how does the economy re-scramble and re-constitute the organizational capital that was in those ongoing enterprises? That to me is a hugely difficult problem and whatever you think the government should or should not do, just spending a lot on fiscal stimulus will not ease that problem. That’s the actual destruction going on is the relationships, the organizational capital, the intangibles that will decay. Not over two weeks, probably not over four weeks but over four or five months or longer. Then I think that’s a matter really of great concern…
But even in China where the number of new cases is really in most parts of the country, genuinely very low, they are not returning with live sporting events. Keep in mind we will have a pool of never infected people, which will be fairly large in absolute numbers and what risks we will be willing to take. Insurance companies would allow, our liability system and corporate lawyers would be willing to allow. When you think through all of that stickiness, I think we’re really not so close to resuming many of these shutdown activities.
There is much more at the link, we start off on the personal side and then move into the larger issues.
This is my subjective impression, not based on scientific sampling. Nonetheless, I think you should prefer cooked, hot food from a cuisine whose associated country already has had a traumatic experience with coronavirus. They will take the risk more seriously. You should avoid uncooked salads from lackadaisical countries that have been slow to respond.
In other words, I believe Chinese food is safest. Furthermore, entry restrictions have been on Chinese people for some time, so the chance that your cook or waiter picked up the coronavirus from China and is still carrying it is very small, whereas Italians have been free to come and go with no real questioning at the airport.
Chinese restaurants also tend to be in the suburbs, and they pack in the tables less closely.