Metal contamination, a term which should only be used to describe Metallica’s St. Anger album, found itself in headlines all across the U.S. last year. After receiving 8 complaints from customers finding metal fragments in their food, Kraft Foods ordered a recall on over 6 million boxes of their beloved Mac N’ Cheese.
Kraft Foods, a company which does not fall under the Dodd-Frank Act, is too big to fail. The Kraft Empire has planted their flag on shelves in convenience stores and supermarkets all over the world, and that flag isn’t going anywhere anytime soon.
The recall did, of course, have a negative effect on Kraft’s balance sheet, but more so, on their brand. As consumers became aware of the contamination, they switched to Kruger’s Mac N’ Cheese - or stopped eating Mac N’ Cheese all together. This is a natural response, but boycotting a supply chain is not always that easy.
The Problem With The Matanuska Thunderfuck
While any transaction noncompliant with law is considered to be made in the Black Market, most often we associate the Black Market with the sale of drugs. When browsing the Silk Road on the Darknet, there is most often no brand attached to the product being sold. Though it is not uncommon to come across a specific product with a “brand”, such as Matanuska Thunderfuck, any supplier can give their product that name - since trademark laws do not apply in the sale of illegal goods.
To have a brand is highly important for businesses; this is evidently clear since businesses spend a humongous amount of money building their brand. In a regular market, consumers can identify a product and make a decision on whether or not the product is good by simply looking at the label. While companies, like Kraft Foods, do mess up every once in awhile, they face heavy economic and legal consequences for doing so.
However, when you pick up an eighth of Matanuska Thunderfuck from your dealer, you have no information about the supply chain; if you are given a bad dose, switching dealer will not necessarily mean switching supply chain. While there may be no serious repercussions from a petty drug like marijuana, selling a bad dose of heroin could lead to permanent damages or death for whomever is injecting the bad dose. Even after such devastating events, there is no damage done to the supply chain. In the real market, this would never happen. The company would have been slapped in the face with lawsuits and they would have had to order a recall of the drug.
Here is the fundamental principle of economics at work -- incentives matters. Johnson & Johnson’s infamous 1982 Tylenol recall of 21 million packages cost the company millions of dollars; after seeing reports that people were dying due to poisoning from their product, they ordered a complete recall of their product, even though it’s likely that only a handful out of the millions of packages were tainted. Johnson & Johnson then installed triple safety seal packaging to make sure the same incident would not happen again. They knew that if consumers thought that there was even the slightest chance that their product was poisoned, the consumers would stop purchasing the drug.
There’s no incentive, however, for suppliers of illegal drugs to order a recall on their product if they realize that what they produced turned out to be hazardous (try suing someone for selling you bad heroin). Since it’s nearly impossible to identify who produced the drug, the supply chain’s reputation is not damaged when their dealer is selling a bad dose.
Had the products been sold in a legal market, drug suppliers would have been pressured to produce products of good, and safe, quality or they would have had to face the consequences. Does this mean that we should make illegal drugs legal? Not necessarily. While the War on Drugs is a complete failure (More: The Disastrous War On Drugs), making drugs legal just because it could have harmful consequences to the people buying it illegally is plainly ridiculous.
However, perhaps we should be a bit more appreciative of brands in the food and drug industry. While some people may think that buying Kraft’s Mac N’ Cheese is dangerous, now that they found pieces of metal in their product, I’d like to think the opposite. Since Kraft Foods wants to protect their brand, they will make sure that the same thing does not happen ever again. In fact, it’s probably more likely that one will find metal pieces in their Kruger Mac N’ Cheese at this point in time.