The Corner

Annals of Retail Food Arbitrage

From Butner (N.C.) Federal Correctional Complex comes news that Bernie Madoff, whose Ponzi scheme defrauded thousands of investors beginning in the 1980s, is still hustling for bucks. Recently he bought up the prison’s entire supply of Swiss Miss hot-chocolate packets at the canteen’s low price and made a tidy profit reselling them at the higher market rate. In other words, he has moved from straight-up theft to exploiting government subsidies. That may qualify as a tiny moral step forward.

Meanwhile, down Mexico way, in a blatant act of cultural appropriation, an entrepreneur is making a pretty peso by arbitraging Krispy Kreme doughnuts. Sonia Garcia buys four dozen boxes (mostly glazed) in West Texas town of El Paso and takes them across the border to Juarez, where she sells them at a 60 percent markup. Mexicans, like everyone else, crave that sweet, yeasty Krispy Kreme taste, but due to drug-cartel violence, the chain has no outlet in Juarez. So, as in any flourishing market economy, an intrepid entrepreneur is filling the gap (she has a Facebook page and a hotline for party orders). When there’s money to be made, profit seekers brave dangers that the government won’t. So instead of making Mexicans pay for a wall, why not let them pay for doughnuts?

Then there’s this New York Times article about how SNAP (food stamps) recipients buy a lot of soda. SNAP (Supplemental Nutrition Assistance Program) funds are supposed to be spent only on actual food, but the sugar lobby got an exception included for soft drinks, and defends it tenaciously. As this article shows, non-SNAP households buy a lot of soft drinks too, but SNAP households buy even more, and in an attempt to account for this difference, the Times piece quotes its usual assortment of bureaucrats and think-tankers.

The article’s author could have saved himself some trouble by actually talking to a few SNAP recipients – or reading this piece by NR’s indefatigable roving correspondent, Kevin D. Williamson. Kevin roved on down to Owsley County, Ky., and learned that the locals routinely use their SNAP debit cards to buy cases of soft drinks — which they then resell to other merchants for a lower price. Crazy? No — because the money they receive is cash, which can be used to buy anything, and is thus much more economically useful than SNAP dollars, particularly if you’re a drug addict. “The local economy runs on black-market soda the way Baghdad ran on contraband crude during the days of sanctions,” Kevin writes. It just goes to show that even in America’s poorest county, you’re never too poor to take advantage of arbitrage.