The Cost Benefit Principle behind the Packaging of Fresh Fruit Juices and Soft Drinks

It have been found that fresh fruit juices are mostly found in paper cartons and the soft drinks are generally found round cans. The reason is that people will be consuming soft drinks directly from the cans unlike the fresh fruit juices. The product design choices are made by the manufacturers on the basis of the concept of cost and benefit. The warehousing, transportation, storage and store shelf spaces are quite expensive in nature. From this point of view, the cartons are more efficient and also not that expensive. Thee soft drinks are generally consumed directly from the container (Bauer 2018). The extra cost of producing the cylindrical containers are justified since they fit more comfortably in hand as people generally drink straight from the cans. The cost and benefit principle help the business to analyse the business decisions. The business or analyst sums the benefits of a situation and then subtracts the costs associated with taking the actions. The fresh fruit juices are generally consumed at home by pouring into the glass than consuming directly from the cartons. The fresh fruit juices are always refrigerated which results in rise in the total distribution cost. Therefore, the manufacturers of the fresh fruit juices choose space efficient design which will minimize the cost without sacrificing the value of consumer. On the other hand soft drinks and soda are generally consumed directly from the bottle or can. The shape of the can are made in such a way that it is easier to grip and dispose. As fresh fruit juices are also are stored in refrigerated cabinets, they are usually stored in rectangular cartons. Therefore, it can be said that the manufacturers of both he products have manufactured thee cartons and cans on the basis of cost and benefit principle. The rectangular containers also helps in saving the shelf space. The shelf space which is used counts much more in case of milk than in case of soft drinks as soft drinks can be easily stored in the open shelves which cost less and have no operating expense. Fresh fruit juices are need to be stored under a regulated low temperature. Therefore, a specially made shelf must be made in order to keep its freshness.  It have been found that these shelves usually cost more than the regular ones and also incurs a huge amount of operating cost. Therefore, every inch of the fresh fruit juice occupies is worth more than the soft drink can. The producers hence incurs additional cost for providing the features for the products by creating a better experience for the consumers. The cost benefit analysis is therefore used to analyse the decisions. 

The Economies of Kenya and Sri Lanka

The analyst usually sums the benefits of the situation and then subtracts the cost associated with taking the action (Nicholson and Snyder 2014).  In the cost benefit analysis, the costs should include both direct, indirect cost, intangible cost and the cost of the potential risk. The costs versus benefits states that the fresh fruit juices are rectangular in shape. The reason behind this is that it is quite easier to ship since they are compacted closely together in the vehicles which will help in saving money on shipping. On the other hand, the containers for the soft drinks and soda bottles use can stand pressure while being shipped to the stores. The reason can also be that the in case of soft drinks, they are put in round containers as the pressure of the carbon di oxide can be handled more with a round container than in case of rectangular container which will save a lot of money on the material cost (Friedman 2017). Therefore it can be said that the reason behind packing the fresh fruit juices in rectangular cartons and soft drinks are stored in round cans. 

Kenya is a tropical East African country with presence of wide diversity of climate and geographic regions. The diverse economy of Kenya allows the crops to be introduced successfully. The production of tea have also contributed significantly to the Kenyan economy. Tea is grown in several districts of Kenya. The main economic sectors of Sri Lanka are tourism, tea export and other agricultural products. The tea production is known as the one of the main sources of foreign exchange for Sri Lanka (Bauer 2018. The humidity and the rainfall in the central highlands of the country provides favourable climate for production of high quality tea. The tea industry plays an important role in the economy of Sri Lanka. The tea industry of Sri Lanka usually aces several problems.  

The global consumption and the production of tea have been increasing over few decades. The industry have become one of the significant contributor to the economies of producing countries. The demand for tea and coffee are known to be inelastic in nature. The price of the agricultural products like those of cotton, tea and coffee tend to fluctuate more often than the prices of manufactured products and services. The reason behind this is due to the presence of volatility in the market supply of the agricultural products with the fact that thee demand and supply are price inelastic. The prices of the agricultural products are quite volatile in nature (Cheserek, Elbehri and Bore 2015). When there is increase in the production of tea and on the other hand the demand does not rise much, there will be fall in price since the demand for tea is not up to the supply. Both Kenya and Sri Lanka are the major exporters of tea which has witnessed erratic cropping patterns this kind of cropping patterns have led to supply side. The export volumes for the first few months in the year of 2017 have seemed to increase by around 5.7%. Sri Lanka is one of the main producer of tea in Asia and Kenya is one the famous tea producing country in Africa. The price volatility refers to the variations in the economic variables over time. It have been found out that most of the agricultural commodity are characterized by a high degree of volatility. The reasons behind this is that the agricultural product like tea varies in different periods of time from natural shocks which includes weather and pests. The demand elasticity of tea is also relatively small with respect to price and therefore, the supply elasticity’s are also low in case of short run. Per capita consumption of tea remains quite low in Columbia during 2015. There are various factors which results in fluctuation in the prices of the products. Fluctuating weather conditions can harm supply and therefore creates problem for the agricultural products. In case of good weather, it can lead to an unexpectedly large increase in supply (Hilal and Mubarak 2016). Sometimes disease and pests will also be affecting the supply of the agricultural products like tea and coffee. The inelastic demand is also a result of fluctuation of prices of tea in case of both Kenya and Sri Lanka. The demand for tea is relatively inelastic in nature (Postlewaite 2016). When the price of the tea falls, there will be a small percentage rise in the demand. The reason behind this is that there is a presence of very few substitutes of tea. With inelastic demand, a change in price will result to large change in price. In case of short run, the supply of tea is inelastic in nature. When the price of tea rises, farmers will not be able to respond by increasing supply. This can also result in fluctuation of price of the agricultural products. Sri Lanka is one of the largest producer of tea in the global market. It is very important for identifying the market structures and government intervening to this industry is quite crucial in the global market. The global production along with the consumption of tea have risen steadily over the past decade. 

Tea Production and Price Volatility

The price of tea in Kenya have been fluctuating from the year 2014 till the year 2018. The price of tea had been higher in the year 2014. In the year 2015, the price of tea had been fluctuating and in the year of 2016, the price of tea again rose (Hilal and Mubarak 2016). The price kept on fluctuating from 2014 to 2018. In case of Sri Lanka it can be seen that that the price have fallen on a larger scale in the year of 2015 compared to the recent years. The price of tea in case of Kenya have been fluctuating over the past years due to various reasons. Some of the reasons include:

Pests and diseases: Some of the seasons make the prevalence of the disease to be more popular and make the farmers of the Kenya suffer a huge loss. Various adverse forces are present which threatens the tea industry which results in price fluctuation in tea industry. One of the reason is that presence of weak trend in the price of the export of tea. The problem of the export price usually takes place when the worldwide tea exports increases which takes place more rapidly than the world consumption. In the last few years there had been surplus of supply of tea in to the world market (Postlewaite 2016). This had also led to the effect of depressing auction prices. One of the main reasons behind the fluctuating price of the price of tea is the danger which is caused by the rising costs of production. With the rise of cost of production, there is a result of fluctuation of tea prices in Kenya.

On the other hand the price of tea in Sri Lanka had been not been fluctuating so much compared to yea prices of Kenya. The price of tea have increased in the year of 2015 from the month of May to November. The price of tea then again decreased in the year 2016. The price of tea was highest in the year of 2017 and then again fluctuated after that. Poor farming methods also results in fluctuation of prices. From the graph it can be said that the price of tea in case of Kenya have increased at a much higher rate in the year 2016 (Hilal and Mubarak 2016). After that it kept on declining from 2017 to 2018. On the other hand in case of Sri Lanka, the price of tea have decreased at an increasing rate in the year 2015-2016. After the year of 2016, the price of tea in case of Sri Lanka kept on increasing till the present date. Between the month of December 2014 and July 2015, there had been increase in the price of tea by 64% in Mombasa. From the graph it can be said that the fluctuation of price in both the countries of Sri Lanka and Kenya had been quite different in nature. The tea production is known to decline in the year of 2012 as there is a result of crop loss in Kenya which account for loss of 16% of the black tea production. The crop levels of Sri Lanka contributes to around 10 percent of global tea production are also low. The reduced global availability of tea results in the continuation of an upward price across the country. The tea production of Kenya is expected to remain around 7 percent lower than the last year. In the year of 2017, the production of tea in Kenya us expected to remain around 7 percent lower than the previous year. 

Reference list

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Cheserek, B.C., Elbehri, A. and Bore, J., 2015. Analysis of links between climate variables and tea production in the recent past in Kenya. Donnish Journal of Research in Environmental Studies, 2(2), pp.5-17.

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Friedman, L.S., 2017. The microeconomics of public policy analysis. Princeton University Press.

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Nijamdeen, A., Zubair, L., Dharmadasa, M., Najimuddin, N. and Randiwela, M., 2018. Tea and Climate Report Sri Lanka.

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