Why do people not seem to consider private grants in favor of small public ones?
I'm not sure if this "answers" the question, but my belief is that people apply for grants for a combination of one of two reasons:


they want the money itself
they want the record of succeeding in getting the money.


While true of both public and private money, part of the prestige is that grants put their money where their mouths are. And public ones -- especially with longer histories can bank on those names (whether the banking is always warranted is of  course another question).

Your point is vis-a-vis 1 and could be restated as (A) more money is available through other means or (B) the amount of work vs. amount of money is a bad deal.

But the defense of pursuing famous public grants centers around 2. These public funding sources are (A) well-known, (B) perceived to have solid review processes, and (C) they are seen as prestigious because of (A) and (B), which should also make them (D) highly  competitive.

These features tend to make them attractive for career purposes. This is especially true when the quality of research is being evaluated by people who are not in the same field. I've got no idea what the Annual Peanut Factory Conference C's level is, but that the Snickers grant comes with $10,000,000 or even $1000 tells me that nut researchers would have competed to get it, and that you getting it means something.

In Japan for instance, Kakenhi from the government and how much you've gotten is a metric for getting jobs. In the USA, having gotten NSF or DOE grants can also help you in the future to get better positions or money.