The Juice Costs Nothing: Why Prepared Meals Are So Cheap When Groceries Are So Expensive

The American food system is in disarray. The complex that successfully delivered cheap calories and vitamins for decades has begun to unravel. Inflated grocery and restaurant prices have become a dominant political issue. Food delivery using a "Taxi" model has proven to be an unwieldy and expensive disappointment. Restaurant bankruptcies are at near-record levels. Our populace is becoming more obese despite miraculous breakthroughs in GLP-1 agonists. Consumer packaged goods manufacturers face new legal challenges from both the FTC and, perhaps even more ominously, from unhealthy litigants.
Help is on the way. An assortment of innovative entities are working on effective solutions. A few of them are household names. Grocers focused on less expensive private label products include Aldi; Costco Wholesale; Walmart and Trader Joe's.
Some of the others will be familiar to followers of the industry. These include Turbochef; Salad and Go; Rational AG; Hungry Root; Thrive Market; Farmer's Fridge; Marc Lore's Wonder; Cuisine Solutions and Travis Kalanick's Cloud Kitchen.
Many of the other innovators are less well-known. Examples include Angie's Food Concepts; Feast & Fettle; SVK; Eatch; Pod Foods; Supplant; Product & Prosper; FreshRealm; Galley; Everytable and Pasta Vita.
Prepared meals of restaurant quality can be created at a lower cost than cooking at home. This relative cost advantage is embedded in the cost structure of the American food industry. The layers of labor cost throughout the food system from farm to kitchen or restaurant dining room make food more expensive and less healthy than it needs to be.
Of a consumer's average expenditure of $100 at a grocery store, only $13.40 is paid to the farmers and ranchers who actually produce the food. The economics of the restaurant industry are even more striking. Of the $100 spent at a restaurant, only $3.10 represents payments to the farmers and ranchers. More of the cost of a restaurant meal is typically spent on legal fees, accountants, insurance and financing costs (5.9%) than is paid to farmers.
The grocery business is the recipient of more than $200 billion annually in what the industry euphemistically calls "trade spend." The food that is sold in all grocery stores has a retail value of $1.1 trillion. The value of that food when it leaves the farm is about $150 billion. The cost that grocers pay their wholesale suppliers is about $750 billion. So the expense of ensuring that sugar frosted flakes are placed on an end-cap display or cookies are placed at eye level that is easy to reach costs more than the ingredients. The beginnings of the crumbling of this system can be seen in the steady growth of Aldi and Costco while the stock prices of the leading CPGs have stagnated.
There are some green shoots that show promise for reducing the cost of both groceries and food away from home. Salad & Go and Angie's Lobster are the creation of a husband and wife team that sell salads twice as large as Sweetgreen at half the price and sell lobster rolls in the Arizona desert for $10.99. The key to their strategy is backward integration to their supply sources. A prepared meal kitchen in Old Saybrook Connecticut sells healthy, inexpensive comfort food priced 20% below McDonald's. It produces sales per square foot more than eight times Costco or Trader Joe's. A food hall concept in New York called SVK serves 3,000 meals per day with a staff of five people. A Dutch robotics startup called Eatch has an automated kitchen that costs $1.4 million that produces 900 meals an hour with only two people.
The cost of production of a satisfying, tasty meal with no unhealthy additives can be less than $2.00 per meal. Therein lies the heart of a solution to food deserts, school lunches and the SNAP program.
Finally, the charges alleged in the first-of-a-kind lawsuit filed in Philadelphia in December 2024 against 11 large CPGs concerning sugar addiction are serious.
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