It’s still pretty cheap, but until this week Countdown’s Quattro Formagi pizza was even cheaper. How did its price ever make economic sense?
This article was first published on Stuff.
Countdown was in the news this week when it raised the price of its frozen pizzas, imported from Italy, from an original price of $4 to $9. The supermarket subsequently dropped the price to $7, saying the previous increase had been an error.
While some lamented the price rise, others wondered how a pizza made in Italy could find its way into New Zealand freezers for less than the price of a coffee in the first place.
University of Auckland senior lecturer in operations and supply chain management Subhamoy Ganguly said the $4 pizza came down to two things: transport and economy of scale.
While a pizza from Italy might take weeks to get across the water, the trip itself could only cost a few cents per pie, he said.
“It may be across long distances, but ocean transport is very, very efficient. That frozen pizza that costs a few dollars in the supermarket, the transport element may only cost pennies when you do the math,” Ganguly said.
International transport costs have a lot to do with geography and existing shipping routes.
While the South Island is a producer of wheat, many bakers and chefs making pizza in the North Island will likely get their flour from Australia because of these shipping routes, he said.
The second reason for a cheap Italian frozen pizza was the economy of scale, which allowed those ordering products in higher quantities to do so at a cheaper rate per unit.
“Most processing companies lend themselves to economies of scale, but that is difficult to achieve in New Zealand because we are a small country. That is why you see overseas importers bringing in cheaper goods.”
But a growing focus on a greener economy and consumer activism could soon start to lessen the volume of cheap goods imported internationally from overseas, he said.
“There is a growing interest in consumers about where the product they purchase comes from, and what did it cost? Not just in a monetary sense, but also in an environmental sense.”
If pizza enthusiasts in the North Island discovered it cost 50 cents more to have their pizza made domestically rather than imported, but it would not come with the carbon baggage of being shipped from Italy, more people would be happy to pay that, he said.
The Countdown Quattro Formagi, Pepperoni, Tomato and Mozzarella, Meat Lovers, Ham and Pineapple and Roasted Mediterranean Pizzas are all made in Italy.
A Countdown spokesperson said most food products right across the board had seen price rises.
“The food and beverage sector is currently experiencing significant inflationary pressure, increased production and freight costs, and dealing with the impacts of the war in Ukraine and Covid-19,” she said.
Countdown would not give information about how the pizzas were previously imported to allow for a retail price of $4, saying the information was “commercially sensitive”.