The Extra Cheese Index

With all the conflation of various economic metrics to tell us if the economy is stable or on the verge of a recession, is it any wonder that it’s impossible to find a straight answer from an economist? Media’s economic reports are excerpts of press releases from government economists which aren’t scrutinized for accuracy and deeper meaning.? You’d think with our technology platforms, we would have better and more timely indicators for inflation, the CPI and GDP that can tell us what matters in near-real time. Instead, we hear monthly or quarterly press releases that sum up to: “it isn’t that bad or not that bad at all.” However, we all can see price increases across all consumer products and services.

I began noticing price-creep in 2016 while lunching at Taco Bell and several different sandwich shops.? My favorite cheap lunch is from Taco Bell, I still love their tacos, Mexican pizza, nachos and burritos. I have been eating the same six things for fifty years at Taco Bell, I sometimes try the new items, but ultimately revert to tried & true.? However, Taco Bell is stingy in their cheese allocation for tacos and burritos much to my dismay. I don’t have that problem at Taco Beuno or Del Taco, only Taco Bell. In 2016, I noticed that Taco Bell was charging $.10 for extra cheese.? Ok, no biggie even though I suspect it cost them $.01 for that extra pinch of bulk industrial processed shredded cheese. Then in 2017 that pinch started to increase to $.25 then $.35, then $.50 and presently it’s at $.75 for a 650% price increase in 8 years. ??$.75 for a pinch of cheese they purchase in tonnage!? ?I am sure that bulk cheese prices for Yum! Brands who own Taco Bell, haven’t increased 650%, but I can speculate that their very smart finance department is trying to find profit growth from anywhere they think it will work.

In 1991 Taco Bell had the $.59/$.79/$.99 value menu covering their tacos, burritos, tostada, taco supreme and even the combo burrito.? The $1 menu was in play for the last twenty years until January of 2024 when they had to bump it to the “$3 Cravings Menu” and the core burritos and tacos are nowhere to be found.? Everyone can see that inflation.

This isn’t just about my extra cheese on tacos being too pricey, it’s everything in food created quickly or otherwise. See the price increases all laid out for the major fast-food chains in an article in Financebuzz.com https://tinyurl.com/Fast-Food-Index

Three quotes from this illuminating article:

• “From 2014 to 2024, average menu prices have risen between 39% and 100% — all increases outpace inflation during the given time period (31%).”
• “McDonald’s menu prices have doubled (100% increase) since 2014 across popular items — the highest of any chain we analyzed.”
• “Popeyes follows McDonald’s with an 86% increase, and Taco Bell is third at +81%.”

I am proposing that this is primarily a result of the entire supply chain cost structure going up and secondly the pressure of these companies that are publicly traded to keep pace with growing revenue and profits each quarter.? Stock market pressure has always been there, but the costs to shred cheese have soared, and that is a significant issue today that wasn’t a problem ten years ago. ?These companies have smart CFOs and financial analysts, they aren’t increasing prices willy-nilly; they are public companies trying to ensure unending growth. This development in our economy isn’t sustainable given wage increases are not keeping the same pace as food prices.

The only positive of this development is that I think this data shines a light on something more useful than any of the stats put out by economists from D.C. that change definitions (coffee was removed from the CPI https://tinyurl.com/Coffee-Inflation ) under political pressure.? I suspect a high percentage of America passes through fast food chains often enough that this data compiled as an index would be more useful than a government CPI statistic that is intended to be comprehensive, but I suspect we will find out eventually that it has been manipulated to fit a narrative.?? Fast food prices should not rise as disproportionately as they have given that the consumer market that finds the most appeal to fast food is those that can afford it the least.? That is, in January 2016 the CPI was 231.916 and in April 2024 313.548 which is 35.2% increase https://tinyurl.com/CPI-History? ??Therefore, we are told consumer prices, in general, have increased 35% in eight years or 7% each year measured as a compound annual growth rate (“CAGR”), yet fast food alone outpaced inflation by an additional 31% and select McDonalds items have increased 100% in ten years.

I propose something simpler than the CPI to understand as a leading indicator of inflation:

The Extra Cheese Index. ?I propose either the good people at FinanceBuzz.com or someone who wants to pick up the ball can take this compilation of fast-food price points and keep track of it monthly. Publish and promote it on social media so that everyone is clear how a key sector of the economy touches virtually everyone except the superrich (not that there’s anything wrong with being rich and not eating fast food).? This is an index we all can understand what it is and question “why” or “how?” ??Keep in mind the CFO’s and analysts at these publicly traded are not motivated by politics or obfuscation, they are motivated by keeping their gig or getting a promotion.? This means sustainable growth must persist.? They are not increasing prices solely because “they can” and “the CEO wants a new boat” – it isn’t that simple. They are increasing prices to solve an ongoing math riddle that the more we, as consumers can see it play out clearly, the more it hits home with every consumer in an understandable way.?

Extra cheese increasing at a CAGR of 32% every year of the past eight or 650% was a canary in the coalmine or leading indicator. ?Cleary, “add-on prices” including extra cheese needs to be a separate metric in addition to the fast-food price index as it will prove to be a perpetual leading indicator of future price increases affecting the index. ?Any consumer can understand these indicators and index as it isn’t a fast-food issue, it’s a symptom of an entire supply chain that touches many sectors of our economy. And that is how an under-cheesed taco can tell us more than complex CPI reports.