Is Food Cheaper in the EU?

A Food Price Comparison

The topic of food quality comes up frequently in discussions comparing the United States and the European Union. But lately, I’ve been hearing that food is actually cheaper in the EU than here in the U.S. Comparing the cost of food items across multiple countries is no easy feat and can only be done by considering cultural preferences, geographical variables and cost of living differences.  

I can’t help but wonder how truly accurate these claims of cheaper food are.

On the surface it isn’t surprising that American tourists enjoy reasonably priced wine and abundance of affordable produce at a market in Spain. Also, many American's are finding the cost of living overall is cheaper aboard. However, individually cheap items might even make them bemoan the cost of strawberries at Costco, or perhaps just the American grocery shopping experience. But, this comparison isn’t a true picture of price differences between the United States and our European neighbors.  A little digging reveals that comments of this nature tend to stem from single item comparisons rather than total grocery spending.

Do Europeans Grocery Shop Differently?

Culturally speaking, European consumers are generally believed to be more accustomed to eating in season than Americans. Produce items might be found in more abundance in a given season and therefore sold at a cheaper price while other items are entirely unavailable. If out of season items are available it's likely they come with a price tag that reflects it.  

The price of a seasonally available item is influenced by the fact that goods didn’t have to travel across an ocean to market or, in many cases, haven’t been treated and packaged to avoid spoilage. It is reasonable to say that at a certain point in the year asparagus could be sold at a lower price in several European countries than it is in the U.S. but, we can’t say all produce is cheaper in the EU all the time. These cost comparisons must be viewed in light of what is most available and regional consumption habits.

Another grocery shopping difference lies in the frequency of shopping trips and the amount purchased in a single trip.  In the US economies of scale are prioritized. Americans tend to shop at stores like Costco where items are purchased in bulk. Bulk shopping affords shoppers a discount.  More is spent in one shopping trip, but per gram cost is often less. Americans will make a big shopping trip once a month to stock up on items.  And, Americans enjoy a one-stop-shop experience. They will pay more for certain items if it means they can buy all the things they need in one store.

In European countries consumers tend to visit a grocery store more often and purchase what they need for a few days at a time. Food items are packaged in smaller serving sizes so it appears that a bunch of asparagus costs less when in reality it might just be a smaller amount of food.

How do Geographic Differences Influence Food Prices?

Agricultural dominance in the United States has, in part, been built because of geographical features conducive to the flow of goods. The Mississippi River alone makes it fairly easy to transfer produce and grains from northern states down to the south and the many ports that ferry commodities abroad.  Well established trade routes make for economically efficient supply chains. But, the United States is still a large land mass and even if goods are produced and consumed domestically, they tend to travel long distances. Transportation costs are unavoidable and are usually passed on to the consumer.

California produce must travel some 2,000 miles to make it to consumers in the Midwest.  Whereas, any produce leaving Spain headed for France only travels about 1,000 miles which reduces transportation costs that add to purchasing prices. Floridians might pay less for strawberries, because so many strawberry crops are produced in the region whereas South Dakotans find them a bit higher. The same is true in the EU. French tourists can travel a relatively short distance to find reasonably priced citrus in Spain, but might pay more if they shop in their own local grocery stores and find they are paying for oranges and fuel it took to deliver them.

In this regard, the two are similar. Despite the fact that the EU benefits from free trade between its members, which works to keep food prices down, European countries off the beaten path of trade routes or far from agricultural hubs pay higher prices for groceries in the same way that Americans living in rural areas do. It might be easier to compare food production and grocery store food prices between California and France than the United States and the European Union.

Grocery Bills Influenced by Cost of Living

There's a general perception that Americans have more disposable income to spend on groceries and that supermarket prices reflect this economic fact. The average annual income in the U.S. is higher than the majority of the 27 EU member countries; however, Americans can pay more for things like health insurance or child care than Europeans do. From this perspective the question shifts from which country has the cheapest groceries to how much of a budget is allocated for buying groceries.  A pie chart might reveal that the percentage of budgets used for groceries is fairly similar across both regions.

Food prices in Helsinki, Vienna, Copenhagen, Milan, London, Brussels, Edinburgh, Frankfurt, Dublin, Amsterdam, Munich, and Stockholm are considered compatible with the average Western budget.  Warsaw and Budapest have extremely low priced food thanks to the agricultural richness of their areas and low labor costs.  Geneva, Zurich and Oslo fall on the expensive end of the grocery price spectrum where the cost of food is the result of higher wages and more regulations. 

In general, the higher the income rate, the more expensive food tends to be.  Yet, as household earnings begin to increase, the percentage of income budgeted for food items goes down.  If we were to include Asia and Africa into the mix we would see this to be true. Wages in these regions are lower than in the majority of EU countries and the United States.  Households must allocate a far higher percentage of that income for food purchases.  Even if consumers favor the more affordable and regularly available items, they are still spending a larger portion of their income.

In truth, the same item that costs $100 in New York might cost $156 in Denmark, $85 in Portugal and $40 in the Czech Republic.  These price differences are capturing income, consumption and spending habits as well as supply chain logistics.