Spam and other inferior goods rally

Earlier, this week, we saw Aldi announce the opening of many new stores in Ireland next year. Of course, this is hardly surprising, in the current economic climate, as Aldi (and Lidl) concentrate mainly on selling inferior goods. Remember, 'inferior' is purely an economic term - it implies nothing about the actual quality of the good itself. From an economics perspective, inferior goods are goods whose demand has an inverse relationship with the consumer's income, i.e. as the consumer's income increases, demand decreases and vice-versa. Inferior goods exist because as people's incomes rise they tend to move onto more expensive goods and away from cheaper ones, e.g. own-brand cereals. Likewise, if incomes are decreasing, these inferior goods will become more attractive to consumers.

Here is an example of the growth in demand for an inferior good in the US — Spam. Spam is a cheap canned precooked meat product. The labeled ingredients are: chopped pork shoulder meat with ham meat added, salt, water, sugar, and sodium nitrite to help keep its color. As it is vacuum-sealed in a can, it does not require refrigeration; Spam can last for years. The product has become part of many jokes and urban legends about mystery meat, which has made it part of pop culture and folklore.

However, the makers of Spam, the Hormel Foods Corporation, have never had it so good. Employees in their factories are working at a furious pace and piling up all the overtime they want. Why? Well, through war and recession, Americans have turned to Spam as a way to save money while still putting something that resembles meat on the table. Now, in a sign of the times, it is happening again, and Hormel is cranking out as much Spam as its workers can produce.

Even as consumers are cutting back on 'normal goods', Spam is among a select group of 'inferior goods' that are selling steadily. Pancake mixes and instant potatoes are booming. So too are vitamins, fruit and vegetable preservatives and beer, according to data compiled, in October, by Information Resources, a US market research firm.“We’ve seen a double-digit increase in the sale of rice and beans,” said Teena Massingill, spokeswoman for the Safeway grocery chain. Kraft Foods said recently that some of its value-oriented products like macaroni and cheese, Jell-O and Kool-Aid were experiencing robust growth.