Baguettes and croissants can be purchased for as little as 80 cents in the trendy but expensive Parisian bakery.
It can be not easy to choose a wine from a well-stocked supermarket or hypermarket.
When I go wine shopping in France, my biggest problem is choosing from hundreds of bottles whose price tags range from $2.71 up to $6.79 (2-5 euros).
Parisian restaurants also offer set menus for a very reasonable price. The main course plus a dessert can be purchased at varying prices between $20 and $28.
The price of Australian food was once again brought to my attention when I returned to the inner suburbs of Sydney. Local bakers sell sweet croissants and brioches up to $4.50, as well as baguettes from $3.50 to £5.
Even more difficult to justify are the prices of cheese and wine. You can expect to pay at least $25 for a main course in a cafe or restaurant.
Why are some foods so expensive?
There are several possible explanations. The obvious reason is that production costs in Australia are higher than in France.
Official statistics contradict this. According to the Australian Bureau of Statistics, productivity in Australia has increased since the late 1980s. In addition, labor costs are lower than in France.
In 2008, France’s average gross annual income was approximately $67,000, or 47,000 Euros (as an interesting side note: the net income was about 24,000 Euros, showing that income tax and social contributions combined accounted for 49% of the total revenue). The average weekly wage in 2008 was $1285 or 900 euros.
The average gross weekly earnings of Australian employees in 2010 was $1010, which is 20% less than the French equivalent.
Could the raw material cost be a factor in the retail price of food if the Australian labor cost cannot be justified?
Both countries have a healthy local food industry. France and Australia both produce and export wheat; they both grow grapes, have local wine industries, and both have dairy industries.
It is unlikely that production costs can explain the differences in food retail prices between these countries.
It is said that competition between retailers is necessary to keep prices down, but is it possible that the competition becomes complacent if the watchdog falls asleep?
Could it be possible that Australia has a “workable” competition syndrome?
Recent OECD research comparing the inflation of food prices in Australia, the United Kingdom, and France over the past ten years (2000-2010) showed that food inflation in Australia has been 43%, compared with 37% in the UK and 22% in France.
Why is the inflation of food prices in France so much lower? Answer: Although food prices in France are not regulated, the government actively interferes in retail affairs by controlling anticompetitive practices.
While our politicians may tell us they are doing everything to promote healthy competition in the industry, it’s very difficult for any government without regulatory intervention to create a competitive atmosphere.
In 2010, the French government took a structural approach to address unfair trade practices, i.e., the imbalance in bargaining power that exists between parties contracting (typically between large retailers/farmers and the food producers/farmers).
This reform aims to protect farmers by reregulating the agricultural markets.
To protect farmers’ revenue, it is important to enforce long-term contracts between farmers and retailers. This will protect the farmers against price fluctuations and price fixing.
The French ACCC, ‘L’Autorite de la Concurrence’ (ADLC), is closely monitoring and sanctioning anticompetitive conduct.
In the past 40 years, France has taken a number of legislative measures, including prohibiting loss leaders (unlike Australia, where it is allowed).
The law also assesses and regulates the viability and long-term benefit of large commercial centers and takes into account the local community and existing retailing center. It prohibits the practice whereby suppliers pay large retailers retroactive rebates.
France, like other European countries, has recognized that transparency in the supply chain will encourage competition and improve the resilience of the food chain to volatile prices.
In 2008, France launched the “Observatoire des prix et des marges” (Observatory of Prices and Profit Margins), which compared food prices with those of other European countries. But more importantly, it monitored and analyzed price transmissions from international markets to consumers.
The public price monitoring is updated monthly, and the French Parliament receives it once a year to facilitate negotiations between government agencies and the food sector.
