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Specialty Chocolate's Price Premium

Posted by James Plamondon on January 10, 2016 . 0 Comments

What is the price ratio of specialty chocolate vs. commodity chocolate — and what does that tell us about the price ratio that specialty jasmine rice might command?

Chocolate's Specialty Price Ratio

Walmart sells a 7oz Hershey's Milk Chocolate bar for US$2, which is $0.29/oz. We'll call that the "commodity price".

In contrast, the specialty chocolate cited in this article sold, at the time the article was written, for an average price of $4.78/oz (which is $76.42/pound, which is $168.47/kilo). We'll call that the "specialty price".

The premium for specialty chocolate is hence approximately (specialty price) / (commodity price) = ($4.78/oz) / ($0.29/oz) =  a specialty price premium of 17:1, give or take.

Applying Chocolate's Specialty Price Ratio to Rice

The cheapest "plain white rice," in 50-pound bags, sells on Amazon for $0.96/pound ($2.11/kg). If we take that as the "commodity rice price" on Amazon, then the price of specialty rice on Amazon could reasonably be expected to be 17 times that, which is ($2.11 * 17 = ) a specialty rice price of $35.87/kg, give or take.

Some specialty rice products do, in fact, currently sell on for prices near or even above this price, as discussed here. Those other products don't have AwardBest's patent on the use of quick-freezing to provide a "world's best, harvest-fresh" guaranteed of year-round quality, which makes such a price premium particularly justifiable and reasonable.

To paraphrase the physicist Richard Feynman: There's plenty of room at the top.

Currently, Cambodian rice exporters are stuck in the "commodity rice" business. They can't win in that business. Their costs are higher than their competition's, so they are losing money on every ton and "hoping to make it up in volume." It can't work. Cambodia needs to get into the "specialty rice" business instead (or, at least, "also"). At this, Cambodia can succeed, because there's plenty of room at the top.


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