What is value density and how does it affect the cost of your shopping basket?

Here in Knysna, the quality of tap water is pretty poor, so there are several shops including Food Lover’s Market, where you can refill your 5L plastic bottles instead of buying new ones.

The cost of a refill is R6 for 5L

The cost of a 5L bottle of spring water at Pick n Pay is R25

Why the huge difference?

Because of value density. Value density is the value in Rands of something divided by its size.

Now, think of a 5L plastic container. What does it cost at the factory door? Practically nothing. Probably no more than R1.

But, to transport all those big empty bits of plastic requires a huge transporter

So, the delivered cost of a low value density item is almost entirely the cost of transporting it.

Whereas, if the same transporter were carrying something whose value density was very high, the transport cost would only be a very small portion of the final cost.

That’s why that plastic bottle, which is practically worthless, adds R25 – R6 = R19 to the price of our 5L of water.



Leave a Reply

XHTML: You can use these tags: <a href="" title=""> <abbr title=""> <acronym title=""> <b> <blockquote cite=""> <cite> <code> <del datetime=""> <em> <i> <q cite=""> <s> <strike> <strong>