None of that answers the question of why a box of cereal that costs a dollar or so to deliver landed to a store costs me $8 to buy. Middle men are taking a huge chunk of the pie!
> costs a dollar or so to deliver landed to a store costs me $8 to buy.
Delivery optimization, logistics, and last mile operations are an unfathomably difficult problem(s) to solve, so much so that the entire world participates and there are still enormous gaps in efficiency, many that likely will never be solved due to physics.
I know you're plain wrong about it costing "a dollar" to deliver. Even if it did, you do not pay for just the operational cost, you pay for the convenience, expertise, reliability, or many other factors that comes with procuring a contract/agreement.
For a while, that was the entire strength of Walmart (efficient distribution) and they did amazingly well with just that. For many years now, even they have not been able to achieve that. It's not so easy.
Their point is simply that your cost estimate is likely wrong.
> It costs pennies to produce, maybe a dollar in landed cost
Kellanova last had gross, operating, and net margins of ~35%, ~13%, and ~8%, respectively [1]. Likewise, Walmart achieved ~25%, ~4%, ~3% [2]. This isn't really compatible with "someone makes 700% of net profits on this box of cereal", unless you assume cereal is single-handedly subsidizing huge loss leaders for both its producer and retailers.
A 13.5 oz box of Kellogg's frosted flakes is $11 at Walmarts. A BIGGER box of 16.5oz is $4.4 in Tesco in the UK, and store brand is $1.25. Salaries are higher on average in the US, but the minimum wage that will include many in the supply chain is higher in the UK. Yes, I would say that there is gouging going on. Besides, a company makes 0% profit if all of it goes to the executives' paychecks, doesn't it?
