There are a number of ultra-premium mass market products for sale in the world. These products cost a lot of money but many people have a chance to buy or try them. Designer handbags and pocketbooks, vintage French wines, and limited edition sports cars are all examples. The economic idea of all these products is the same. First, a relatively limited supply is available each year. Second, a large amount of marketing is done continuously to ensure both exceptionally high product recognition and that consumers’ associate the product as a luxury item.
I just had the opportunity to stop for lunch in Kobe, Japan. Kobe beef is another one of the ultra-premium mass market products. It costs a lot, but given it has occasionally shown up in my local Costco, it is available to most people who want to splurge.
I checked the Internet and found a famous steak house in the heart of Kobe that had been serving the famed beef for over 120 years. The 5 ounce (120 gram) lunch “special” was 10,000 yen or $100 a person (not including tax). It was a pretty outrageous price given the same restaurant was serving an identical lunch, using beef from a regular cow, instead of one from Kobe, for about 6,500 yen or $65. Getting the Kobe name for lunch meant about a 50% markup. Nevertheless, given I have no plans to ever be in Kobe again, I figured it was worth splurging for the ultra-premium product.
The presentation was exceptional. The waitress presented me with a raw steak for inspection to ensure it met my standards. A chef cooked the steak in front of me and used the leftover fat to sautee bean sprouts. Then the cooked beef was put on a metal warming tray so that the meat would not get cold as I ate it.
The result was a piece of steak that was softer and more flavorful than any other steak I have eaten in a restaurant. However, each small bite cost me about $10, given after cooking there were only about ten small pieces of steak to eat!
The price did include a small salad, two rolls and some vegetables as well as the bean sprouts. However, after finishing and paying, I had a small problem. I was still hungry. On my way to the train out of Kobe, I stopped for a burger at McDonalds. In the USA, McDonalds has the dollar meal special. In Japan they offer the same thing as the 100 yen special. I ordered one 100 yen burger to get me through till dinner.
Is Kobe beef worth the price? How about other ultra-premium products? I can only answer the question for myself. In the case of Kobe beef the answer is clearly, NO.