After really diving deep into monopolies and oligopolies, it is hard not to notice all these examples around us today. Whether it be cable TV, fountain drinks, or cellphone network providers, numerous industries are dominated by one or a few large businesses, making it very difficult for competitors. Yet, on the topic of Halloween, one of the biggest examples of oligopolies is right under our noses (and in our mouths!). The chocolate industry is one of the most relevant examples of a few companies controlling virtually all products in that given industry.
You might assume that this statement is false, considering there is a huge variety in candy and chocolate available in today's market. Yet, whether you are buying Skittles or Snickers or M&M's, you are still supporting Mars Brand. Whether you are buying Reese's or Kit Kats (in the US) or Almond Joy, you are still supporting Hershey's. Finally, whether you are buying Laffy Taffy or Fun Dip or Smarties, you are still supporting Nestle. These three powerhouses control over 80% of the nation's chocolate products and 70% of the nation's candy products. With percentages like these, it is hard to argue against the fact that an oligopoly is present.
The largest issue with oligopolies is that they go unchecked by the government when compared to pure monopolies. Because they are able to remain under the radar, they become even more dangerous as companies. Furthermore, due to their domination of the market, it dissuades other companies from growing in size and increasing popularity. Much like how Google and Facebook are able to snuff out their competitors, Mars, Nestle, and Hershey are able to follow a similar tactic.
Source:
- http://ideas.time.com/2013/11/01/why-so-little-candy-variety-blame-the-chocolate-oligopoly/
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The oligopoly of the candy industry reminded me of another example of oligopoly: the soft drink industry. Although you can walk up to a drink dispenser and pick from up to 10 options, or on the new digitized dispensers, up to 100 options, really, you are buying from the same firm. Soft drink firms branch out to several different brand names. For example, Coca Cola owns all the different variations of their drink, as well as Dasani water and Powerade.
ReplyDeleteOne interesting characteristic of this particular oligopoly is that there's still significant innovation within different brands. A lot of brands, like Reese's, come out with new variations on classic candy. A person might think that because of the limited number of sellers and ability for companies to be price setters, there wouldn't be a lot of innovation within a market, but the candy market is different in that there is still pressure to innovate to meet consumer demands, especially to maximize profit past just one type of well known candy.
ReplyDeleteI really like how you gave us examples of different candies that are tied under one company to show us an oligopoly. Another oligopoly is the food industry where there are plenty of companies such as Kraft Heinz that have plenty of smaller brands under them such as Kraft, Heinz, and Oscar Meyer. Therefore, you may think you're eating something from a different company but in reality it may be from the same.
ReplyDeleteIn your last paragraph you reference how a lot of these larger candy industries control the marketplace and kill competition simply because they are larger. After, you compare this to the networking industry by relating it to Google and Facebook. I think this kind of distinction is very thought provoking, one would think that Google and Facebook would serve certain niches that stomp out competition, ie. everyone uses Google because it is "most convenient" or Facebook because it is localized and their friends use it. In regards to candy, companies cannot really leverage "convenience" meaning they would have to default to some other method to remain in control, especially when other candy industries or even small businesses try to specialize to combat the monopolies.
ReplyDeleteAfter reading this, I was interested in what the other 30% of candy brands were. But as I was researching, I came across a recent article explaining how Nestle recently sold their U.S. confectionery business to Italy’s Ferrero for $2.8 billion. This now put Ferrero Rocher pralines as the third-largest candy company in the U.S. The article stated that Nestle did it because of health concerns, but I wonder if interest in the market is going down as healthier options arrive. Maybe we will see a change in these oligopolies in these upcoming years as demand changes.
ReplyDeleteIts very interesting to think about how many oligopolies there are around us. It seems like almost everything could be though of as an oligopoly. You mentioned that these companies can become dangerous, but how? While its alarming that 3 companies control most of the candy supply, will it actually effect consumers in a significant way?
ReplyDeleteI like how you connect how the candy industry is an oligopoly. We generally associate oligopolies with industries that are larger such as telephone companies and social media, not necessarily companies that make candy. I find it interesting how when I eat candy, I didn't notice that there were only 3 major companies that were making all of these candies. I thought each candy were individual brands.
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