Who Sees the Money?

By PSU EcoMerge Capstone - 2:25 PM

Sometimes we, as consumers, aren’t always aware of how our money is distributed after a purchase. When we hand over cash to buy a package of Oscar Mayer Classic Wieners for our picky nephew coming over this weekend, where does it really go? If you’re a little curious as to how your bucks break down, read on.
Americans eat lots of high-mileage meals. It is estimated that a single food item, from its site of production to its delivery destination (i.e. grocery store), travels over 1500 miles! Now imagine if those were all truck miles (they could be rail, ship or another form of transportation).
The average operating cost per mile for the trucking industry is $1.38. That cost is reached by adding together what it costs per mile for a truck to operate. In order of highest expense to lowest, those costs are: fuel, driver salary, truck cab/trailer, maintenance, tires and permits/licenses/tolls.
That means, with distance traveled and expense per mile - one package of hot-dogs cost $2,070 to get to your local grocery store! Of-course, a truck isn’t usually loaded with just one package of hot dogs. A loaded truck usually carries a median of 75,000 lbs.
A package of Oscar Mayer Classic Wieners, containing 10 hot-dogs, weighs 1 lb. Therefore, our truck is carrying a possible 75,000 packages of hot-dogs. That in turn brings down our transportation cost to $0.28 for one single package of dogs. A consumer is usually able to purchase this particular brand of hot-dog for an average of $2.78 – which puts the transportation cost for each package purchased (around that price) at the 10% mark. So, 10% of the price paid for a protein source, that is not purchased from a local grower or producer, goes to transportation costs.
Now we need to factor in a few more things before we really know where our $2.78 went. The store that carried those wieners lost the amount that it cost for them to even carry that inventory in the first place. According to IMS Consulting, a store invests about 25% of their carrying price in inventory carrying costs every year (such as storage space, utility bills and equipment). So we’ve lost $0.70 to the carrying costs from that package of wieners, leaving us with $1.80. Well, actually that leaves us with $1.77 because the average grocery market profits about 1% on their inventory prices.
let’s not forget to factor in the grocery store’s costs of operation (wages, insurance, licensing etc.) which average around 15%. So there goes another $0.42 from our Oscar Mayer Wieners. Now all we have left to work with, which takes us to the beginning of the story for our hot-dogs, is $1.35. That is not a very high number to work with when we consider that the beginning of the story hasn’t even been told yet. We have not looked at the costs of production. $1.35 per package is all we have left to distribute to the costs of operation for the factory where these dogs were produced and the profit for the company to receive – not to mention the percentage that goes to the farms where the animals were raised for this production facility.
We won’t get into the breakdown of those costs here – but the point is this: it is up to the consumer to decide if it is important to purchase proteins that are grown and produced locally. Next time you buy groceries, you are deciding if that 51% of costs that we just looked at should go more directly to the farmers and growers, or if it should continue to be distributed the way it has been described above. 


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