Anja Ettel and Holger Zschäpitz
November 06, 2017
BERLIN — Who hasn't experienced the mild disillusionment that follows a fabulous vacation: One moment you're enjoying a heavenly pasta al pesto in Italy and the next, you're having noodles at home with basil and olive oil — just not the same. And the crispy baguette with salted butter and honey you savored on the terrace of your holiday home in southern France, which tasted like sweet freedom, is now just plain old honey on white bread.
Of course different countries have different specialties: Anyone who has eaten a German puff pastry and a French croissant knows they are different. But sometimes you wonder if there are other factors that play into making certain foods taste so differently depending on where you are. Is it the view? Is it the air? Or your mood?
When it comes to food produced industrially for the entire European market, recipes rarely differ. A good example is Nutella: A jumbo jar of Nutella (usually about 750 grams) contains 1% more sugar in Italy and Austria than in Germany. Otherwise, the ingredients are exactly the same: sugar, fat, hazelnuts and chocolate.
Often, the only significant difference is the price.
In Germany a kilogram of Nutella costs 5.06 euros on average. In France the same jar will set you back 5.45 euros, and in Britain, about 5.78 euros. But it is in Italy, the birthplace of the spread invented by Pietro Ferrero in 1946, that Nutella costs the most, at 6.65 euros per kilogram.
Interestingly, the difference in Nutella prices, like other food products you might have on vacation, tells us something about the European economy, such as a member country's purchasing power. Pricing can tell us what country is doing particularly well within the bloc, how well the single market is doing, what parts of its infrastructure are obsolete, how consumer behavior has been conditioned in each country, and what sways consumers in general.
A jar of Nutella costs more in France than in Germany.
Nutella Economics are a bit like the Big Mac Index, invented by The Economist in the 1980s, which is used to compare purchasing power parity between countries, using a standard burger.
Theoretically, the task should be simple, and the price for a certain product within a homogenous single market like the EU should be the same everywhere, since the ingredients and the finished product can be transported across borders without customs. If Nutella from Italy is too expensive, retailers could simply have it delivered from Germany. Or at least that is how things would work in an ideal economy. But in reality, only tourists and people living along a border can benefit from cheaper prices on the other side. Most others will never even know that some products are cheaper in other countries.
Daniel Zimmer, the former head of the European Monopoly and Mergers Commission and an expert on economic competition models, has been researching the phenomenon of different pricing. According to him, competition is the sole reason that some goods cost more in one country than another.
A single European market should mean that prices are the same everywhere, Zimmer says, "but what retailers in the individual member states do is another matter."
Products are often cheaper in countries where many retailers have to compete for customers, Zimmer explains, but in countries where competition is limited, retailers can charge higher prices for the same goods.
That said, he adds, it will only be good for consumers if a few big players vie for their favor, but only to a certain degree of market concentration. "If this is exceeded, it becomes easier for the suppliers to coordinate their market behavior and then prices rise."
A glance at the statistics can illustrate this. In Scandinavia, with Norway and Finland in the lead, five large food retailers control more than 75% of the market. The same applies to the market in Belgium and Luxembourg. Therefore, products are expensive. And though the combined market share of the large retailers in Germany also amounts to about 62%, discount supermarkets, such as Aldi and Lidl, play a more significant role there than in other countries because their share amounts to 42%, which works like an emergency brake on prices. This explains why Nutella is relatively cheap in Germany.
If the rules of an ideal and rational economy applied, Nutella would be cheaper in Italy, where there is no alliance of large supermarket chains and food retailers, and the market saturation of the larger retailers is at only 30%. But food, on average, is more expensive in Italy than in Germany. The Nutella Index proves this, with Nutella 30% more expensive in Italy than in Germany.
Pick one — Photo: Claudette Rodriguez
But why is it so? Zimmer explains that a higher market saturation can be an advantage for the consumer because it stimulates competition in general. So competition is a leading factor of price differences across Europe, but it is not the only one.
The Germans, Italians and Norwegians themselves also help determine whether a product is more or less expensive there than in other countries. By buying one thing but not another they promote or inhibit competition among retailers. What matters is what they are willing to pay for a certain product, and how they evaluate the cost-benefit ratio. This particular behavior directly influences the respective national markets. "If the customer is willing to pay more, then as a consequence, retailers are able to charge more for their products," says Zimmer.
And the willingness to pay more for food products varies significantly across Europe. Germans, for example, only spend one euro out of 10 of their disposable income on food; the French and Italians spend much more.
"Germany has been conditioned by the rise of discount supermarkets like Aldi. The Germans have learned that they can get good quality for very little," says Björn Dahmen of Simon Kucher & Partners. As a consultant, he advises companies on how to price their products for the highest possible profit margin, a particularly difficult goal to achieve in Germany, according to Dahmen.
The spending culture is very different in other countries, Dahmen says. "In France, for example, consumers are convinced that they have to spend a lot of money to get good quality," he says. There, it is perfectly reasonable for a supermarket to display several expensive brands of ham with each pack of four or five slices costing five euros. "This would be inconceivable in Germany, where ham costs around two euros a pack." This attitude toward spending has consequences for the entire European market.
The Nutella phenomenon highlights a distinct problem within Europe.
A jar of Nutella costs more in France than in Germany even if it is sold by the same retailer, Lidl, for example, in both countries.
"It is our goal to provide the best possible value-for-money ratio in every country," Lidl says. To achieve this, the company considers primarily "the economic conditions of the local market." But the markets of the individual EU member states are not directly comparable. "The basic conditions for a price comparison between individual markets are only there when all market factors that affect the price level are also approximately at the same level," the company says.
And that is not the case. The Nutella phenomenon highlights a distinct problem within Europe. Even 18 years after the introduction of the euro, companies operate under different conditions, depending on the country they are in. While countries like Germany benefit from the common currency and are able to expand their business model, others who are less competitive are left empty-handed.
Which is why Nutella is particularly expensive in its country of origin. Italy has always been the "problem child" of the Eurozone and has so far not been able to find its way in the European monetary union. The Nutella Index explains why Italians have to pay up to a third more than the Germans for the same product. In order to match prices with Germany, the Italians would have to devalue their currency but this is impossible within a monetary union.
In this age of digital revolution, Amazon might just be able to bring about some change. "There are very few companies who provide such extensive price transparency across borders as Amazon does," says Dahmen. This has already been evident in the electronics market.
Still, Dahmen says it is hard to imagine that Germany's low prices will spread throughout Europe and that a kilogram of Nutella will cost only 5.06 euros everywhere. He believes adjustments will be made in both directions, so that the price of Nutella will go down in some countries, but will rise slightly in Germany, where some people will be willing to pay more. "It is quite difficult to predict if and when this will change," he says.
Die Welt ("The World") is a German daily founded in Hamburg in 1946, and currently owned by the Axel Springer AG company, Europe's largest publishing house. Now based in Berlin, Die Welt is sold in more than 130 countries. A Sunday edition called Welt am Sonntag has been published since 1948.
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With loans and solar panels from China, the massive solar park has been opened a year and is already powering the surrounding areas. Now the Chinese supplier is pushing for an expansion.
October 18, 2021
CAUCHARI — Driving across the border with Chile into the northwest Argentine department of Susques, you may spot what looks like a black mass in the distance. Arriving at a 4,000-meter altitude in the municipality of Cauchari, what comes into view instead is an assembly of 960,000 solar panels. It is the world's highest photovoltaic (PV) park, which is also the second biggest solar energy facility in Latin America, after Mexico's Aguascalientes plant.
Spread over 800 hectares in an arid landscape, the Cauchari park has been operating for a year, and has so far turned sunshine into 315 megawatts of electricity, enough to power the local provincial capital of Jujuy through the national grid.
It has also generated some $50 million for the province, which Governor Gerardo Morales has allocated to building 239 schools.
Abundant sunshine, low temperatures
The physicist Martín Albornoz says Cauchari, which means "link to the sun," is exposed to the best solar radiation anywhere. The area has 260 days of sunshine, with no smog and relatively low temperatures, which helps keep the panels in optimal conditions.
Its construction began with a loan of more than $331 million from China's Eximbank, which allowed the purchase of panels made in Shanghai. They arrived in Buenos Aires in 2,500 containers and were later trucked a considerable distance to the site in Cauchari . This was a titanic project that required 1,200 builders and 10-ton cranes, but will save some 780,000 tons of CO2 emissions a year.
It is now run by 60 technicians. Its panels, with a 25-year guarantee, follow the sun's path and are cleaned twice a year. The plant is expected to have a service life of 40 years. Its choice of location was based on power lines traced in the 1990s to export power to Chile, now fed by the park.
Chinese engineers working in an office at the Cauchari park
Chinese want to expand
The plant belongs to the public-sector firm Jemse (Jujuy Energía y Minería), created in 2011 by the province's then governor Eduardo Fellner. Jemse's president, Felipe Albornoz, says that once Chinese credits are repaid in 20 years, Cauchari will earn the province $600 million.
The Argentine Energy ministry must now decide on the park's proposed expansion. The Chinese would pay in $200 million, which will help install 400,000 additional panels and generate enough power for the entire province of Jujuy.
The park's CEO, Guillermo Hoerth, observes that state policies are key to turning Jujuy into a green province. "We must change the production model. The world is rapidly cutting fossil fuel emissions. This is a great opportunity," Hoerth says.
The province's energy chief, Mario Pizarro, says in turn that Susques and three other provincial districts are already self-sufficient with clean energy, and three other districts would soon follow.
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