Come August 15 in the traditional lunar calendar, the mid-Autumn festival is observed in various forms around the world. Along with it comes the frenzy for mooncakes, where malls and eateries are packed with boxes upon boxes of mooncakes of every shape and flavour, from champagne truffle to tom yum.
While festive snacks taste great and come in beautiful packaging, they can go for rather exorbitant prices. We examine the economics of pricey mooncakes, and why these sweet treats are still being bought up even at $88 a box.
Form Above Function
Over the years, mooncake packaging has evolved beyond their original function of simply storing the snacks. The competitive market has meant that ever more intricately designed boxes are vying for the attention and dollars of the customer. As the gifting of mooncakes among friends, family and business associates is common, beautiful packaging are apt for gifting and receiving during the festive season.
Inevitably, the demand for increasingly elaborate packaging drives up production costs. Form at times, has come to far outweigh function in the case for mooncake packaging, which is typically discarded after use. Impressive as they are, not many people would end up reusing these boxes, contributing significantly to waste.
What comes to mind when you think of “premium” mooncakes? Probably “premium” brands from hotels like Goodwood Park, the Marriott and Shangri-La.
While nondescript mooncakes from a outlet might taste similar to brand-name mooncakes, when it comes to gifting of mooncakes, presenting something that premium conveys sincerity and respect on the gift giver’s part, something important in Chinese culture.
The price people pay for gifting a box of premium mooncakes? A price premium. Popular hotels and restaurants are able to rely on their brands’ reputation to charge a price premium on mooncakes.
Demand for Mooncakes is Price Inelastic
Unlike other foodstuffs like dumplings, mooncakes are not readily available all year round. They are only available in this season, and the demand for mooncakes naturally spike when the mid-Autumn festival draws near. Since mooncakes are a perishable good, it is not really possible to buy mooncakes early and stockpile them until it is time to gift or consume them.
Mooncake sellers can charge high prices and people will still buy a similar amount of mooncakes, regardless of whether the price increases or is lowered. Lowering the price is not likely to bring significantly more people into the market. For those who celebrate the mid-autumn festival, a price hike isn’t likely to dissuade would-be buyers.
Read More: Singapore Mooncake Cheatsheet 2017
There is No Substitute to Mooncakes
Unlike flowers on Valentine’s Day, which can be replaced with chocolates or other romantic gifts, there are really nothing that can substitute for mooncakes in this festive season. The centrality of mooncakes to mid-Autumn festival is much like having turkey on Thanksgiving.
However inflated the price of mooncakes may be, observing the tradition of gifting and enjoyment of mooncakes is still important to many and that is why mooncakes still fly off shelves, despite our understanding of economics. Here’s wishing you and your loved ones, a happy mid-autumn festival!
DollarsAndSense.sg aims to provide interesting, bite-sized financial articles that are relevant to all Singaporeans. Subscribe to our free e-newsletter to receive exclusive content not available anywhere else. Also follow us on Instagram to get your dose of finance knowledge visually.
Bonds and Fixed Income