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Since economics refers to the production and distribution of goods and services, a Sweetgreen salad is about more than lettuce.
It is all about economics.
Sweetgreen’s Salad Economics
Sweetgreen started in a college dorm when three friends had an idea. The year was 2006 and the idea was farm to table food. Describing their startup success, they raised $300,000 from 40 or so people. As for their mission, they name fresh ingredients, relationships with farmers, and the importance of technology.
Fast forwarding to November 2021, we see a Sweetgreen IPO that gave the company a market value of more than $5.5 billion. With shares priced at $28, the stock opened at $52. Sadly, since then, its shares have remained near their offering price:
One problem is the quest for profits.
Oversimplifying a bit, we could say that a $15 salad costs them $17.56. Much more than lettuce, they transport the ingredients, purchase packaging, and pay for labor. In addition, they have their real estate and technology. Summing it up, we find a slew of fixed and variable costs that wind up as a salad.
Below, you can see the details:
As of November 2023, there were 220 Sweetgreen restaurants in the United States.
Our Bottom Line: Salad Land, Labor, and Capital
As economists, we can look at Sweetgreen through a factors of production lens. Composed of land, labor, and capital, the factors of production create our goods and services. Sweetgreen’s land (in the above graphic) probably is covered by “Occupancy.” Its labor is $4.35, and a part of their capital expense comes from inventory required by “Food, Drinks, and Packaging.” In addition, we have the technology that they say will create profits moving forward. Especially, they cite a roll-out of their (approximately $500,000 per store) Infinite Kitchen that will automate preparation with a whopping 500 bowls an hour (far more than their suburban demand but good for the city). Fast Company tells us that it took two years for their tech to shoot perfect automated goat cheese crumbles.
So, whenever we order a salad, let us think of the land, labor, and capital that prepared the lettuce…and the goat cheese.
My sources and more: Thanks to Sherwood (my new go-to for quirky ideas) for inspiring today’s post. From there, I found details at WSJ’s Economics of… video and a “How Brands Are Born” blog. Then, for the update, CNBC discussed the 2021 IPO while Yahoo Finance had Sweetgreen’s current numbers. And finally, this industry news source and Fast Company had the automation facts.
