Price Competition: The Frozen Tamale Syndrome

I’m mad as Hell, once again, and this time it’s about tamales. But this rant, which I hope you’ll continue to read, is not about food processing or industrial hygiene, or indigestion, for that matter. It’s about quality, the barriers that exist in our society the impede  the manufacture of quality products, and ways around those barriers. 

A friend of mine has long favored a particular brand of frozen tamales that’s only available in one national grocery chain. But recently, the recipe has been changed, and the once delectable beef tamale in this line now features potatoes and “stringy carrots” as part of its filling. These are ingredients, most would agree, that don’t belong in a tamale.

It doesn’t take five why’s to figure out how the carrots got there. They’re there to provide the same quantity of filling at a lower cost. Obviously, carrots cost less than beef. Why the carrot/potato enhancement? Because a broad spectrum of other costs are going up, e.g. energy and therefore transportation, and the tamale company has to lower its costs somewhere to maintain its profit margins. Why can’t it raise prices? Because the chain has mandated a pre-determined price point it believes its customers want. Why will the customers buy this product anyway? Well, here the situation gets a little bit more complex. Maybe they will, and maybe they won’t.  And, if they vote with their wallets not to buy the “improved” recipe, eventually the chain will stop buying them, the tamale company will lose a customer, and life will go on.

The problem with this decision model is that it has so many price-driven constraints that it’s basically a formula for making the tamales worse, and worse, and worse. Not only the ones in question, but all their competitors as well. And finally, when the process has gone on long enough and good frozen tamales are no longer available, an entrepreneur will come up with a premium or even super-premium tamale and captures a decent share of market. This is a phenomenon that has been prominent in beer and ice cream.

It’s also a phenomenon that applies to everything that’s sold on the shelves of the Wal-Marts and Targets and Home Depots of the world.

So, if you’re caught in this kind of price-driven situation - and let’s get beyond food here and talk about everything from lawnmowers to coffee makers - what are your options? Are there, in fact, any options other than to play the price competition game?

I think there are if you're selling a consumer product. The first strategy is to educate the consumer. If you have a better product, you had better be able to explain why. Where do you do this? On the package for starters, and on your web site. I recommend product photos with leader lines connected to short feature-benefit statements. You can also undertake an educational PR campaign, but be prepared to pay several thousand dollars per month if you take that route.

The second strategy is to bypass the retailer entirely and sell direct. online. If you do this, you need to be careful not to anger your conventional distribution chain, but typically they mainly want to make sure you're not cutting the price online. And you shouldn't be. Rather, you should be upping the quality.