A couple months ago, I mentioned the new data dashboards we’ve created in the Center for Food Demand Analysis and Sustainability (CFDAS) showing spending on different restaurants over time and across location.
We are continuing to update that data and now have an associated series of infographics at our main site. Below are a few screenshots.
There is a lot more at the CFDAS website, including a cool animation showing trends in food delivery sales.
My team in the Center for Food Demand Analysis and Sustainability (CFDAS) at Purdue University has worked to create two new data dashboards showing consumer spending at restaurants and for food delivery. We partnered with the firm Facteus, which processes debit/credit card transactions, and we use their data to understand trends, geographic differences, and rankings of restaurant in terms of consumer spending.
The first dashboard shows spending at restaurants, including fast food and casual dining (be patient: it might take a few seconds to load; the dataset is HUGE!). The figure below shows the dashboard set to McDonalds (the restaurant with the most sales). Apparently, Kansas is the state with the highest per-capita expenditures at McDonalds, although the highest McDonalds spending occurs in zip codes in Texas and California. The time trend shows McDonalds sales fared pretty well during the pandemic.
By contrast, if we look at a more traditional “sit down” restaurant like Applebee’s, the dip in sales during the pandemic is much more noticeable.
It is fun to look at geographic patterns in per-capita spending. For example, here are several top-selling fast food chains along with a couple regional favorites, including my personal favorite, Whataburger (yes, I am a Texas native).
You can even zoom in to the zip-code level if you want to see spending variation within a state. Have fun playing around with the dashboard yourself.
We have a second dashboard that looks similar except it shows spending patterns on meal delivery apps. Here is a screenshot of spending on Uber Eats, which clearly benefited by the pandemic.
We are looking forward to really digging into these data as we aim to better explore consumers food buying behavior in these food-away-from home markets.
About a month ago, Tamar Haspel re-opened a debate on the merits (or, rather, demerits) of junk food advertising to children in her regular Washington Post column. My intent is not to take issue with anything written there per se, but rather to bring up a dimension to this debate she didn’t address.
Even if accepts the premise that “advertising works”, and increases the rate at which people buy junk food, that knowledge is insufficient to understand the impacts of an advertising ban for at least two reasons. First, what will people consume instead once ads are banned, and what is the cost and healthfulness of the newly purchased items? Second, how will food manufacturers and consumers respond to the ban?
In a paper back in 2014, Vincent Réquillart and Louis-Georges Soler, while very much in favor of policies aimed at promoting healthy eating, do a good job describing the various ways that food companies might respond to advertising bans or taxes. Companies don’t just “sit still.” For example, if a firm can no longer advertise, what happens to the money the previously spend in this way? Perhaps they invest in cost savings technologies that allow them to lower the price of the food, which would encourage additional consumption. Or, unable to compete by advertising, firms may engage in more price competition, again driving down prices and bringing more consumers into the market - presumably the opposite of the intended effect of the policy.
A couple years ago, Pierre Dubois, Rachel Griffith, and Martin O’Connell published a very careful and through paper in the Review of Economic Studies on this very topic by studying advertising on potato chips in the U.K. They found that an advertising ban would lower the share of consumers buying potato chips by about 5.3 percentage points; however, they also estimated that in response to the ban, firms would lower chip prices, which would bring more consumers back to the chip market, making the net effect of the advertising ban only a 4 percentage point reduction on the share of shoppers buying chips.
So far so good if the goal is an overall reduction in chip buying. However, they also showed that the advertising ban (after all the anticipated price changes) would increase consumption of other unhealthy products by about 2.7 percentage points. The problem, as they point out, is that “these alternative snacks are, on average, less healthy than potato chips (their mean nutrient score is 20 compared to around 14 for potato chips).”
They offer a solution to this problem: a broader ban on advertising to include all “junk food,” however it is unclear which foods would be deemed “junk.” And, the broader point remains: there will likely be offsetting price effects, albeit perhaps not large enough to completely offset the impacts of the lack of advertising.
Ultimately, Tamar ends her piece making a moral argument, and insofar as advertisements aimed at kids, she raises some good points. Still, it is important to recognize policies often have unintended effects. Neither companies nor consumers are passive bystanders in the face of policy changes. They respond, and if not in ways that completely offset the intended effects, at least in ways that can significantly dampen the intended effects.
A couple weeks ago, the best selling author Michael Lewis was on campus, and I went to listen to him talk. I’ve read several of Lewis’ books, and it was interesting to hear him talk about some of the underlying themes that united them.
In his 2017 book, the Undoing Project, Lewis writes the history of Kahneman and Tversky and the development of behavioral economics, a field that posits people do not always make rational decisions. In an earlier book, Moneyball (published in 2004), a few stat/econ types realized baseball teams were leaving money on the table by ignoring data on what really drives team wins. One team manager, Billy Beane, attempted to arbitrage the market for players by buying “undervalued” players and putting them to higher-valued use. In another earlier book, the Big Short (published in 2010), Lewis talks about the people who made big bucks on the financial crisis by recognizing that markets were “mispricing” the risks of systemic mortgage failures. In some ways the books are out of order because Lewis’s earlier books described how various people made serious money from the sorts of behavioral biases that Kahneman, Tversky, and others uncovered.
What’s this got to do with food?
Many of the systematic biases that lead people to mis-price baseball players and mortgage-backed securities are likely leading people to mis-price foods made with new technologies. Take GMOs. A Pew study found 88% of scientists but only 37% of the public thought GMOs are safe to eat. Is it possible scientists are wrong and the public is right? Sure, but if you had to place a bet, where would you put your money?
Or, let’s take at a widely studied behavioral bias - the tendency for people to exaggerate the importance of low-probability risks. The propensity to overweight low probability events was one of the cornerstones of prospect theory, which was introduced by Kahneman and Tversky. This theory is sometimes credited as herding the birth of modern-day behavioral economics, and the paper was a key contributor to Kahneman later winning a Nobel Prize. If there is a 1% chance of an outcome occurring, when making decisions, people will often “irrationally” treat it as a 5% or 10% chance. There are many, many studies demonstrating this phenomenon.
Oddly, I have never seen a behavioral economists use this insights to argue that fears over growth hormones, GMOs, pesticides, preservatives, etc. are overblown. However, there are many food and agricultural scientists who argue that many of our food fears are, in fact, irrational in the sense that public perceptions of risk exceed the scientific consensus.
Now, getting back to Michael Lewis’s books on the people who figured out how to profit from behavioral biases in fields as divergent as baseball players and mortgage-backed securities, if we really think people are irrationally afraid of new food technologies, is it possible to put our money where our mouth is? Or, buy fears low and sell them high?
Here are a few half-baked thoughts:
If people are worried about the safety of food ingredients and technologies, shouldn’t they be willing to buy insurance to protect against the perceived harms? And if consumers are overly worried, they should be willing to pay more for insurance than it actually costs to protect against such harms. If we believe this is the case, then creating insurance markets for highly unlikely outcomes should be a money-making opportunity. On the plus side, such markets might also take some of the fear out of buying foods with such technologies since people can hedge their perceived risks.
Let’s say your Monsanto (now Bayer), Syngenta, BASF, or another seed/chemical company. What can you do to assuage consumers’ fears of your technologies, particularly if you believe the perceive risks are exaggerated? Why not offer up a widely publicized bond that will be held in trust in case some adverse event happens within a certain period of time? (This is like when contractors or other service suppliers attempt to gain trust by being bonded). If it is really true that consumers’ fears are exaggerated, the bond won’t be paid out (at least not in full), and will revert back to the company.
Did you know that it is possible to invest in lawsuits? Investors, whose money is used to front the legal bills, earn a portion of the payout if a plaintiff wins a settlement against a corporation or other entity responsible for some harm. The “price” of such investments is likely to rise the greater the public’s perceived odds of winning the case, which presumably related to perceptions of underlying risks. I can imagine institutions or markets arising that would enable investors to short such investments - to make money if the plaintiff losses the case. The current Monsanto-glyphosate verdict not withstanding, shouldn’t it be the case that one could profitability short lawsuits surrounding the safety of food and farm technologies if the fears around them are indeed overblown?
Other ideas?
It was probably about a year ago I started hearing some rumblings about blockchain technology be of use in tracking agricultural products. I was familiar with bitcoin so I had a vague sense of how the technology could be used in a traceability system. But, until a few months ago, it wasn't so obvious to me how it could also be used to increase transparency and even help with contract fulfillment.
Fortunately, the latest issue of Meatingplace Magazine has a great article by Julie Larson Bricher that provides an easy to read primer on blockchain technology - what it is and how it's starting to be used in the food industry.
Here's one excerpt:
“So, what is blockchain? It’s a type of digital distributed leger, or shared database, in which transactions from multiple computers are security recorded into “blocks” of verified data entries in real time. These time-stamped blocks of data are linked together in a sequential chain, which means that the leger cannot be modified or changed.
The distinctive feature of the blockchain is its assurance of data integrity, which makes the records trustworthy – and this is what makes it so attractive to food supply chain companies. In a blockchain, the data can be trusted because all members in a network must agree to each new record is added to the ledger …”
Numerous examples of the blockchain being tested in the food supply chain are given, including Cargill's traceable turkeys (where people could text or enter an on-package code to "access the farm's location ..., view the family farm story, see photos and read a message from the farmer." Other firms mentioned as testing the technology include Tyson, Walmart, IBM, and Carrefour.
To imagine how the technology might ultimately influence the industry, the piece included the following graphic that showed the types of information that could be included in a blockchain for poultry.
I'll end with this final quote on how blockchain could facilitate contracts:
“Blockchain also enables the use of “smart contracts,’ which means that previously agreed terms, conditions or business protocols are built into the digital ledger and automatically triggered and enforced as the terms of agreement are met... By programming contract conditions and terms into the blockchain, contracts are executed by the system itself and not middlemen, which translates into time- and cost-saving business transaction efficiencies.”
It will be interesting to see how this technology transforms the food supply chain and what information we consumers may have one day simply by scanning a bar code at the grocery store.