The Cereal Coupon Cutback May Be Clipping Customers
I read with interest your article "The nervous faces around Kellogg's breakfast table" (Top of the News, July 18). Every article I have seen regarding the cereal business has reported that General Mills Inc. recently decided "to drop its prices." On the surface, this is true. However, a more in-depth analysis indicates it may translate into overall higher prices for consumers. The following example demonstrates this point.
Under the former higher-promotion and higher-price policy, coupon-clipping customers could purchase a $3 box of cereal for $2.25, using a 75 cents coupon. However, under the new marketing scheme, the cutback in promotions and the lack of coupons result in the consumer paying $2.67 (the straight 11% price decrease). This is 42 cents more, or an increase in price of 19% over the $2.25 the consumer used to pay. Who benefits from this so-called price drop? The manufacturer benefits--not the consumer.
Alan M. Schultz