I want to be clear from the onset so you don’t think I have some secret cereal agenda. I have never had Grape-Nuts. I think? It turns out though that a lot of people have had Grape-Nuts and very much would like to see them back on the shelves of their local grocery store. Who knew?
I came across an interesting New York Times article on my feed last week about the apparent disappearance of one of America’s (loved?) cereals. Due to the pandemic, Post has faced some supply chain issues getting the cereal out to stores. People are stuck at home craving an apparent childhood classic while they’re stuck working from home and/or listening to their children’s teachers tirelessly remind 8-year olds that they need to unmute themselves.
Okay, but so where is the economics lesson? It looks like we have the perfect setup for one of my student’s least favorite topics to draw on a graph: shortages. The concept is familiar to almost all of us, but the economic specifics are a bit trickier. We have a situation where demand has increased suddenly and the normal supply chain hasn’t adjusted to meet this sudden change. In normal situations (or at least in Lesson 2 in my class), an increase in demand should result in an increase in the price of a box of Grape-Nuts. Simple Econ 101 right?
The problem is that the cereal market isn’t simple and it isn’t the same type of market that often benefits from “simple Econ 101 analysis.” Post participates in an oligopoly market selling differentiated products against their rivals Kellogs and General Mills. The three of them combine for almost 80% of the market for breakfast cereal in the United States. That means Post can’t “just increase the price” because they face a lot of competition. So what happens when demand increases, supply doesn’t, and prices stay the same? You got it: we’ve got ourselves a shortage.
If you’re suffering along with the other Grape-Nut aficionados, you can join their movement on Twitter with the hashtag #Grapenuts. Let Post know your concerns, or take a gamble on a new cereal. My principles class in the Fall participated in a Cereal Snacket featuring 64 different kinds of cereal. The winner was Cinnamon Toast Crunch, but that’s really not all that surprising among 800 teenagers.
Use the comment button below to tell me which cereals you would have in your Final Four!