21 Apr 2013, 7:54pm
savvy shopping:
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  • A fascinating peek into the inner workings of capitalism – manufactured demand in the making

    Years ago, my Dad had reason to take the cylinder head off the engine of his car and regrind the valves.He showed me the engine running without the rocker cover, and it was fascinating – the busyness of something we take for granted many a day. I’ve never forgotten that insight into the workings of something so commonplace, yet so hidden from everyday sight.

    So it is with the works of capitalism at times. Many companies exist now to create wants in their customers’ minds, which they can then address. One of the secrets to retiring early, indeed to financial freedom of all sorts, is to avoid being sucked in, and here is a beautiful example of the process of need creation in the making. Sheer genius!

    A decent piece of chocolate is a very good thing indeed. Thing is, with gustatory pleasures as well as most consumer goods, the relationship between quality and cost aren’t directly connected. They go something like this:

    genral form of quality versus price for consumer goods

    general form of quality versus price for consumer goods

    Now the trouble is that the price axis is logarithmic – each step roughly doubles the price of the previous step, whereas quality is linear. This reflects the fact that most improvements are subject to diminishing returns. Most of the win is had early on, though there is a rump of cheap and nasty crap that is not really fit for purpose at the bottom end below a price of 1 unit. Most of the quality improvement is to be had in the steep rise of the curve between 1 and 2, and then it flattens out as the price skyrockets. Now what a company wants to do is create a sense of want and desire in you, so you ignore the fact that the price is skyrocketing but the quality isn’t really much better than lower down the scale.

    Fortunately, humans are social animals, and we ascribe value to scarcity, all sorts of fancy trimmings and plumage irrelevant to the item in question, and we are suckers for a good story. Plus we don’t have the time these days to really think about what we are buying, so we make mental shortcuts and analogies with similar patterns elsewhere. As well as these foibles, there are, of course, the age-old things we inherited from the animal kingdon – the value of a peacock’s feathers are not in their great utility, but in showing the female that even carrying all that conspicuous consumption around, the peacock doesn’t get eaten. That same applies to bankers swilling Dom Perignon to excess. It’s not the champagne they are valuing, it is the fact that drinking it to excess shows they are rich enough not to worry about the price 😉

    What a great piece of marketing puffery - Coastal Ecuador, Hacienda Iara 100% Organic Dark

    What a great piece of marketing puffery – Coastal Ecuador, Hacienda Iara 100% Organic Dark

    Allow me to introduce you to Exhibit A. The Hotel Chocolat corporation, and more specifically their Single Estate Rabot 1745 collection, welcome to the £7 bar of chocolate. I first came across this in the Torygraph, who basically line-printed the press releases with a moducum of added spin by the looks of it. However, I was tickled. A few years ago I read Jason Vale’s Chocolate Busters which sensitised me to how chocolate is promoted, and I thought of that book when I saw this.

    You can picture the scene now. Somewhere in a three star corporate hotel near an airport somewhere, a newly appointed Head Honcho of Hotel Chocolat is organising a hothouse workshop, on how to enhance the brand, and drive profitability. In short, to create some value that can be sold to more willing punters. A bunch of guys in off-the-peg suits show up with those wheeled cases with their laptops in. In the morning, the Head Honcho addresses his droids, and tells them this hothouse will come up with thrity-six Innovative Ideas to Revamp the Brand and Drive profitability. Their bonuses depend upon it…

    The trouble with meetings like this is that time is so short, and the leadership usually such arrogant peacocks that there’s no time to actually reflect on whether some of the ideas that come out of the pressure-cooker hothouse are actually any good. We’ve all had those ideas that seemed good at the time, but on reflection of a few days or weeks were actually quite ghastly. However, this one isn’t so bad, perhaps Hotel Chocolat don’t do things that way. Perhaps they have stand-up meetings of no more than 15 minutes, or something like that. The basic idea was

    Why don’t we make chocolate more like wine. Let’s give it a massive big backstory and raise the perceived value. There’s only so good chocolate can get for 99% of our potential customer base, but everyone is a sucker for a great story!

    And so the new marketing was born.

    The Story

    Hotel Chocolat: – I’d have guessed established in the 1990s, and that was a good guess. Companies House tells me that it was incorporated in 1993. Good move on changing the name in 2003 to Hotel Chocolat from Chocexpress Ltd, which made me titter, that sounds so low-rent compared to the image Hotel Chocolat is trying to project now 😉

    I was actually warmed up to be sceptical by the marketing strapline “British cocoa grower and chocolatier”. It’s very nouveau-riche and pretentious  – Cocoa doesn’t grow in Britain and we have confectioners, not chocolatiers. That dissonance matters, particularly if you are trying to create a patina of established competence with

    Rabot 1745: rare and vintage

    The implication is that there is an esteemed heritage going back to days of Empire. It’s bollocks, of course, but adds a haze of antiquity, without ever claiming anything really goes back that far 😉

    The label: a classic piece of spin and flummery. That’s the beauty of taste, it can’t be measured. I could say it tastes like angel tears and pulverised unicorn horn with a soupcon of plum and be just as right 😉

    A charmer with a smouldering intensity. Quickly floods the mouth with super-mellow but deep cocoa, roast nuts, vintage leather and cream.

    Short story: The battle of the cocoa bean is ongoing in Ecuador. The less flavoursome but easier-to-grow CCN-51 variety has been taking over from the delicious and indigenous Arriba Nacional, the one used here.

    Harvest: 2012 Roasting time: 35 min @135 C. Refining & Conching: 65hrs.

    (label backstory, from the website)

     Ecuador was once the world’s powerhouse of cocoa back in the late 1800s, but a disease wiped out many estates in 1919. This estate, known as Hacienda Iara, was re-planted with the fine Arriba Nacional cocoa from the more protected interior of Ecuador and is run on organic principles. An easier to grow, but less flavoursome cocoa variety known as CCN-51 has recently been taking over the country’s crop, but a fight back has started to maintain the true ‘Nacional’ cocoa taste, characterised by an intense cocoa flavour with a subtle jasmine/floral note and relatively low acidity.

    I wasn’t able to substantiate this with research on the web. The whole CCN-51 and Nacional seems to be a shimmering chimera, and depends on who you are reading 😉 But I do accept this isn’t my area of expertise.

    The Price: £7 for 70g, that’s 10p a gram. Tesco sells Galaxy for 1.2p a gram and a good match for this would seem to be something like Green and Black’s Organic Dark at 2p a gram. We’re clearly straddling that knee point of the graph.

    Let’s take a look at what’s happened here. I’d hazard a guess that the value price chart looks something like this

    all that yellow value has been created by marketing

    all that yellow value has been created by marketing

    Basically a huge amont of perceived value has been created by the guys in the suits creating a story that people will buy. It’s because of things like this that many of us find that our Wants grow to about 110% of the size of our take-home pay. We’re suckers for a great story, and we get caught up in it and buy into it.

    Don’t get me wrong, I am sure Hotel Chocolat’s Hacienda Iara Organic Dark is probably a very decent chocolate. But chocolate just isn’t worth the extra 8p/g  a throw to me, compared ot the Green & Black’s version at 2p/g, which is about as far as I need to go with chocolate. Life is too short to go around paying more for the Story than for the Stuff. I try to just pay for the steak, not the sizzle, because there’s a limit to how much steak you can have before you just don’t want any more. Not so for the sizzle 😉

     

     
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