Border bargains

French nurse-trainer France Lio used to peel vegetables over the fliers from Kaufland, a supermarket in nearby Germany. Now, as food costs surge, Kaufland's come-ons are luring her across the border with the promise of much lower prices than at home.

"It's the second time we've come here," says the 55- year-old Strasbourg resident, who made the five-minute drive to Kehl, Germany, with her husband. "We found alcohol-free beer that's 2 1/2 times cheaper than in France, fruit juices that cost 90 cents; they are more than a euro at home. We'll be back."

While fierce retail competition limits price increases in Germany, France's heavily regulated market - with rules for everything from store size to allowable price cuts - has resulted in higher costs for customers. French inflation has outpaced Germany's every month so far this year, reaching a 12-year high of 3.7 percent in May.

French President Nicolas Sarkozy is trying to loosen the rules, making it easier to build supermarkets and letting retailers and suppliers negotiate prices more freely. Lawmakers have approved a measure.

"Prices in supermarkets have increased more in France than in almost all other European countries," Sarkozy said in a nationally televised interview in April. "That's not normal."

Germany is the cheapest country in Europe for international grocery products, according to ACNielsen's 2005 report, its latest. Spain, Italy and the Netherlands are all also cheaper than France.

Pepsi and Palmolive

At a Cora supermarket near Strasbourg, a bottle of Palmolive dishwashing liquid costs 1.73 euros, almost double the 95 cents at Kaufland. In Germany, a pack of six Pepsi Max bottles costs 3.54 euros, 28 percent less than in France.

In towns near the border, 65 percent of products were 15 percent to 30 percent cheaper in Germany than in France, according to a study released in May 2007 by Euro-Info-Consommateurs, a Franco-German consumer association. French shoppers account for 50 percent of retailers' sales in Kehl, where the association is based.

In the parking lot of a Lidl outlet, Germany's second-largest discount supermarket chain, nine out of 10 cars were from France. Frederique Mengus, 41, a French secretary, says she shops there, even though the retailer has a store in Strasbourg, because "there is more choice, better quality and the prices seem lower".

A proliferation of discounters in Germany is helping to limit price increases. "Discounters have played a very important role in Germany for the past 10 to 15 years," says Martine Merigeau, the director of Euro-Info-Consommateurs. "Competitors have been obliged to adjust.'"

According to a report compiled for the French government, "maxi-discount" stores have a 30 percent market share of the food-retail sector in Germany, against 13 percent in France, where opening a store larger than 300 square meters requires a local commission's authorization.

Lineaires, a retail trade magazine, found that 59 percent of discounters' requests were approved in 2007, compared with 75 percent for classic supermarkets and 78 percent for so-called "hypermarkets", sprawling stores common in French suburbs.

'Green light'

The country's four biggest retailers share 66 percent of the market, the Finance Ministry says. To spur competition, the government's bill would raise the surface for which a permit is needed to 1,000 sq m.

Carrefour SA's Ed discount chain "will use the green light" and says it plans to open 50 stores this year. Casino Guichard-Perrachon SA has said it wants to double the number of its LeaderPrice discount stores in five years.

The government's bill "is potentially good, but the current parliament discussion is reducing the scope of the reform," says Gilles Moec, an economist at Bank of America in London.

Owners of small neighborhood stores are lobbying lawmakers, concerned that the discounters will take away business. The government has agreed to amendments granting mayors more power, such as the right to preemptively take over retail space in town centers.

The bill also allows for price negotiations between producers and retailers. Currently, manufacturers have to sell their products to all stores at the same price, and retailers are forbidden from selling goods below cost. They make money on rebates from producers for attractive shelf placements or prominent displays in catalogues.

"We want to introduce more competition," government spokesman Luc Chatel said at a press conference on April 28. The government's plan may cut consumer prices by 1.6 percent within three years, he said.

Meanwhile, French consumers continue to head for the border. "We have to restrain ourselves on even essential things,'" says Marie-Rose Heini, a 63-year-old retiree who shops in Kehl's Edeka supermarket. "We are told to eat five fruits and vegetables a day, but no one can afford that."

Agencies

(China Daily 06/23/2008 page11)