Why doesn’t a half gallon of milk cost half the price of a full gallon?

This is just one of the stories from our “I’ve Always Wondered” series, where we tackle all of your questions about the world of business, no matter how big or small. Ever wondered if recycling is worth it? Or how store brands stack up against name brands? Check out more from the series here.

Josh Pine asks:

Why does a half gallon of milk cost nearly the same price as a gallon of milk, whereas half a pound of cheese costs only half as much as a pound of cheese? 

A half gallon of milk costs a couple of bucks at some grocery stores, while the full gallon might run you only about $1.50 more. That means you’re paying less per ounce for a gallon of milk compared to a half gallon. 

But you’re looking at the glass of milk half full, it’s not necessarily that a half gallon is too expensive, but that you’re getting a gallon of milk at a good price. 

The businesses who do sell half a gallon for a similar price as a gallon of milk are probably losing money on those full gallons, said Jeffrey Dorfman, a professor of agricultural and resource economics at North Carolina State University. They’re willing to accept those losses because grocery stores use milk to attract customers, Dorfman noted. Other loss leaders in the grocery space include products like bananas and rotisserie chickens.

And there are many grocery stores out there that do actually sell half gallons for much less than a full gallon, Dorfman pointed out. 

Another reason why full gallons are less expensive than you might expect? It is a bit cheaper, on a per-ounce basis, to produce a full gallon of milk, Dorfman said. 

“There's not twice as much plastic in the jug or cardboard in the carton. It doesn't take twice as long to go through the assembly line and to bottle it. It doesn't take twice as long to stick it on the shelves,” Dorfman said. 

Economies of scale apply to other beverages, like Coca Cola. “Filling one large bottle with Coke is much more efficient than filling 10 small bottles,” said Amrou Awaysheh, a supply chain expert, in a previous Marketplace interview. 

Some customers also can’t consume a full gallon in time, and grocery stores have realized they can charge a higher price for half gallons, said David Anderson, a professor of agricultural economics at Texas A&M University. 

Compared to products like cheese, milk is more perishable, Anderson pointed out. 

People who regularly want those smaller sizes might be willing to pay a little more because they don’t have enough room in their refrigerator or they don’t have to worry about it going bad in the refrigerator, said David Sumner, an agricultural economics professor at the University of California, Davis. 

That peace of mind can be worth the price.