Todd cooks a methamphetamine batch of only 76% purity and not the distinct blue color expected by European customers. Lydia comments that consumers expect the “blue”, which is a signal of quality and purity, and will pay top dollar only for it. So while even though they are getting better, they aren’t as good as Walter’s blue meth. The blue coloring is important to signal to the European market that the product is high quality (even though it isn’t). If customers believe the meth is the same, they will pay top dollar for the product. Lydia recognizes that without the color, her profits are about to fall.
See more: demand, elasticity of demand, preferences, product differentiation, quality, signaling, value