代做Economics 7200- Assignment 2, Trimester 1 2021 Australian Meal Kit Market代做回归

Economics  7200-Assignment  2,Trimester 12021

Australian Meal Kit Market

While many industries have suffered during the coronavirus outbreak the meal kit industry has boomed.Delivered directly to customer  homes,the weekly  meal  kit  services  provide  easy to  prepare recipes and ingredients for people to cook those meals at home without needing to think about shopping lists and reducing waste by supplying the quantity of food needed.

Across  Australia,the  $300M  meal  kit  market(Greenblat  2021;Mitchell  2020)has  two  main  suppliers of these kits,HelloFresh and Marley Spoon (source),with other smaller suppliers in a single State or   across multiple States.Marley Spoon's global revenue increased by 96 percent during 2020 and in

Australia  by  76  percent(Mickleboro  2021),while  HelloFresh's  revenue  increasing  by  123  percent. Each of the main firms,HelloFresh and Marley Spoon,also has a budget version of their meal kit   service.

There are only a small number firms in this market,however,it can stil be considered a monopolistic  market  due to the  low  barriers  for  entry to this  market  by  other  competitors,and the products  they  provide,while  similar,are  not  identical  and  they  can  differentiate  themselves (Hubbard  et  al.2019)from  other  competitors.There  are  no  specific  qualifications  or  specialised equipment needed to run a business of this nature and in 2020 we saw some businesses temporarily change their market to the meal kit market when they were unable to operate existing hospitality businesses as usual;businesses just need sufficient space,access to suppliers,and the means with which  to  distribute  their  products.

There are very few large competitors in the market.HelloFresh delivers to the metropolitan areas and some  regional  areas  of most Australian  States,except to  Northern  Territory,Western Australia    and Tasmania.Marley  Spoon  delivers to allexcept Western Australia.And,while there are a  number  of other firms in the meal kit market,some of those are also owned by HelloFresh and Marley Spoon and aimed at a different budget.HelloFresh's has a budget meal kit service called EveryPlate which    only supplies to five Australian States,and Marley Spoon's budget meal kit service is Dinnerly which   delivers to the same States its main business does,but also to Western Australia.Two other meal kit services,Thrive and  Pepperleaf,service only four States,and mostly  Eastern or the South-Eastern parts of Australia,and other services are typically State-based or local.

The following market structure analysis uses estimates based on figures quoted from various news sources(Mickleboro  2021,Mitchell  2020),as  detailed  Australian  production  and  sales  information  is not  readily  available.

Figure 1 shows that the demand curve for a firm in this market would be downward sloping.This is because if the firm changes the meal kit price the quantity sold will reduce if price is increased and quantity sold increase if price is reduced.The marginal revenue changes by the difference in the areas of the yellow and orange rectangles.Figure 2 shows that the marginal revenue curve for a firm this market also slopes downward below the demand curve,but at twice the rate of the demand curve,because after a certain number of meal kits have been sold,in this case approximately 115,000,the additional revenue received from selling additional meal kits is smaller than the  revenue lost by selling at a lower price(Hubbard 2019).

Figure 1 Demand Curve and the Affect of a Price Rise for the Australian Meal Kit Market

Figure 2 Demand Curve and Marginal Revenue Curve for the Australian Meal Kit Market

In  order  to  produce  meal  kits  these  firms  would  have  fixed  costs  such  as  rental  of  premises, advertising  and  insurance,and  variable  costs  such  as  staff  wages,meal   kit  supplies,delivery  costs,   printing  of  recipe  cards,packaging,and  utilities.As  customers  place  orders  for  meal  kits  in  advance firms  may  be  able  to  adjust  some  of  their  variable  costs  from  week  to  week.

In  the  short  run  monopolistic  firms  are  able  to  make  reasonable  economic  profit  by  being  able  to  sell their  products  above   market  cost;when  there   is   less  competition  the   meal  kit  firms  can  charge  well   above the average total cost,indicated at the intersection of Pshort run and Qshort run,on the demand curve,shown  below  in  Figure  3.However,in  a  monopolistic  market  they  face  the  addition  of competition  due  to  the   attraction  of  those   profits   and  the   low  barriers  to   entry  for  other  firms.As new  firms  enter  the   market  they  experience  a  decrease   in  demand,the  demand  curve  and  the marginal  revenue  curve  shift   left,the  firm   is  unable  to  sellthe  same  quantity  of  meal   kits  they   had been  at  that  price  and  they  have  to  reduce  the  price  thereby  reducing  profit,as  shown  below  in Figure 4.They  are  then  selling  meal  kits  closer  to  average  total  cost  and  are  more  likely  to  be  at break-even  point  or  possibly  face  zero  economic  profit  or  loss  in  the  long  run.

Figure 3 Short Run Profit for the Australian Meal Kit Market

Figure 4 Long Run Elimination of Profit for the Australian Meal Kit Market

Once new firms have increased competition in a monopolistic market existing firms will need to look for ways to innovate and differentiate themselves from their competitors,otherwise they will continue to make zero economic profit in the long run.In order to make an economic profit in the  short run they will look for ways to retain or attract new customers.To differentiate their products both HelloFresh and Marley Spoon provide existing customers with discount codes to pass on to friends.This approach provides a marketing opportunity in that it encourages their existing customers to talk about their products,and it is a strategy to attract new customers.Each of these discounts offers between $80 and $100 off orders spread over three or four weeks,which also encourages repeat purchases.Marley Spoon recently formed a partnership with Woolworths(B&T Magazine 2020)to promote its kits,and also joined with Maggie Beer to include items from her product range(Le May 2020).HelloFresh collaborated with Perki Kombucha to provide product trials(B&T Magazine 2020).In Adelaide,one local meal kit service differentiates itself by focussing on     eco-friendly      packaging     and      delivery,purchasing     all      produce     and      products      locally,offering particular product discounts for a week,and regularly adding new products to their range,such as  cold brew coffee,fresh pasta,plastic free cheese and laundry items to their range.Both HelloFresh and    Marley     Spoon    have     budget    version    meal     kit     businesses    under    different     names,EveryPlate    and  Dinnerly.These meal kits are cheaper,and the recipes have fewer cooking steps and ingredients,    thereby appealing to those with smaller budgets or less cooking experience.

Alternatively,firms may also find ways to produce their existing product at a lower cost by either introducing new technology or looking for ways to make existing technology or processes more efficient.A firm may then sell less products,but they willhave reduced their average total costs.

Monopolistic markets are typically not allocatively efficient.This is because a firm's product price is greater than the product's marginal cost,so we are not at the allocatively efficient level of production,there is excess capacity.To achieve allocatively efficiency the firm would need to set the price of the product where it is equal to marginal cost(Hubbard 2019),as indicated at A on Figure 5.  To achieve productive efficiency a firm needs to produce a product at the lowest possible average     total cost or using the fewest resources(Hubbard 2019;Economics online,n.d.),that is the lowest point  on  the  average  total  cost  curve.Monopolistic  markets  are  also  generally  not  productively efficient,as  shown  at  B  on  Figure  5.

Figure 5 Allocative and Productive Efficiency for the Australian Meal Kit Market

However,product  differentiation  is  an  important  element  when  considering  whether  a  firm  in  a monopolistic   competition   market   is   efficient.As   previously   mentioned,due   to   the   short   run   cycle   and  long  run  economic  profit  patterns,firms  in  this  market  need  to  be  continually  thinking  about    how   they   differentiate    themselves,and   often    achieve   this   through    innovation.Dynamic   efficiency, which  is  when  a  firm  will  adopt  or  develop  new  technology  or  production  processes  in  order  to improve   their   production(Hubbard   2019)and/or   make   their   product    more   appealing   to   customers, becomes  a  crucial   part  of  the  firm's  ability  to   remain  in  business.These  innovations  also   motivate    other  firms  to   improve  their  technology   or  processes,not  just   in  their  own  industry.This  can  occur  over  a  longer  time  frame,partly  due  to  the  substantial  costs  associated,but  monopolistically competitive  firms  do  also  need  to  be  able  to  adapt  to  market  changes  reasonably  quickly.

References

B&T  Magazine  2020,'Nielsen:meal  kits  Increasingly  popular  amongst  Australian  consumers,up  40   per   cent’,B&T   Magazine,16   January,viewed    16   March   2021,<https://www.bandt.com.au/nielsen- meal-kits-increasingly-popular-amongst-australian-consumers-up-40-per-cent/>

Economics Online n.d.,Efficiency,Economics Online viewed 23  March 2021, <https://www.economicsonline.co.uk/Business_economics/Efficiency.html>

Greenblat,E 2021,'HelloFresh sees demand wane for meal  kits as freedoms  return',The Weekend Australian,14  March,viewed  20   March  2021,

<https://www.theaustralian.com.au/business/companies/hellofresh-sees-demand-wane-for-meal- kits-as-freedoms-return/news-story/21db394dd077784ab1758a49fbe5e98e>

Hubbard,RG,Garnett,AM,Lewis,P&O'Brien,AP    2019,Essentials    of    Economics,4th    edn,Pearson Australia,Melbourne.

Le May,R 2020,'HelloFresh rival builds cash war chest as online grocery shopping soars' news.com.au,23  October,viewed  20   March  2021,

<https://www.news.com.au/lifestyle/food/hellofresh-rival-builds-cash-war-chest-as-online-grocery- shopping-soars/news-story/5669a4eba8d5052d93a78cf898fdbbcd>

Mickleboro,J,Marley  Spoon  (ASX:MMM)share  price  on  watch after  delivering  rapid  revenue growth, viewed   20    March    2021,The    Motley    Fool,<https://www.fool.com.au/2021/02/25/marley-spoon-

asxmmm-share-price-on-watch-after-delivering-rapid-revenue-growth/>

Mitchell,S 2020,'HelloFresh  expands  as  meal  kit  orders  soar’,Australian  Financial  Review,30

September,viewed     16      March     2021,<https://www.afr.com/companies/retail/hellofresh-expands-as- meal-kit-orders-soar-20200930-p560mh>

Mitchell,S  2020,'Meal  kit  boom:Marley  Spoon  sales  soar’,Australian  Financial  Review,29  April, viewed     16     March     2021,<https://www.afr.com/companies/retail/marley-spoon-sales-soar-amid- meal-kit-boom-20200429-p54ob0>