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01 September 2020

PENNY labels its first products with “true prices”


Discussion on prices short-sighted – Consequential costs of consumption missing – Creating transparency

PENNY logo
How much would food actually cost if retail prices took account of the environmental impact at every stage of the supply chain? PENNY and the University of Augsburg have teamed up to address this question by calculating the “true prices” for an initial selection of products. This coincides with the opening of the first interactive sustainability market “PENNY Grüner Weg” at Fehrbelliner Straße 29 in the Spandau area of Berlin. The scientists have calculated the “true costs” for a selection of eight conventional and organically produced private-label products by factoring in the impact of nitrogen, greenhouse gases, energy, and land-use change from each product’s supply chain. On the basis of these four parameters alone, Dr Tobias Gaugler and his team conclude that the current price discussion is too short-sighted because it does not take the consequential costs of our consumption into account – for both organic and conventional farming. They have also found that the production of the conventional food products surveyed does not have as negative an impact as would sometimes appear from the public debate, and in some cases, a simple surcharge of one cent per kilogramme would be sufficient.

According to the exemplary evaluation, the retail price per kilogramme of eight conventionally produced foods (apples, bananas, potatoes, tomatoes, mozzarella, Gouda, milk, and mixed meat) would have to increase by approximately 62 percent on average. This would correspond to an average price increase of €2.30 per kilogramme over current prices. In the case of the organically produced equivalents, the increase would be about 35 percent, or €2.28 per kilogramme. Taking dietary habits into account results in an increase of 52 percent for conventional and 32 percent for organic products, respectively.

“The prices we pay for our food have, in the past, often been the subject of intense and sometimes controversial debate. In our view, however, the current approach is short-sighted, as the calculations from the University of Augsburg show. We have to make the consequential costs of our consumption visible. Only then can consumers decide for themselves when shopping. There is no doubt that we, as a company operating in a highly competitive market, are part of the problem. I do believe, however, that by taking this step, we can become part of the solution. I hope that our customers will react positively to finding two prices on our products. If they do, we could envisage both increasing the number of products labelled in this way and expanding the trial to other stores,” says Stefan Magel, Executive Board Member Retail Germany of the REWE Group and COO PENNY. “At the checkout, of course, our customers only need to pay the retail price without the true costs”, he adds.

PENNY has set up its own interactive information terminal devoted to true costs at its sustainability market, which has now been opened in Spandau, Berlin.

Dr Tobias Gaugler of the Institute for Materials Resource Management at the University of Augsburg adds: “Current food pricing does not reflect the costs incurred by the environmental impact of nitrogen, greenhouse gases, and energy production – or does so only inadequately. Nevertheless, damage to the environment does incur costs, which are simply hidden. Our calculations demonstrate this true price gap, although we do not have the data to account for other important aspects, such as animal welfare or the effects of multi-resistant germs. I am pleased that this discussion is no longer confined to scientific circles and is now part of people’s daily lives. And I’m very excited to see whether this dual pricing initiative will have a steering effect.”

About true costs

Unlike current food prices, the true costs of food products also include the environmental and social costs incurred during food production, also known as “negative externalities”. Although they are caused by food producers, they are currently borne by society as a whole, albeit indirectly. This means, for example, that the real price consumers are paying for agricultural greenhouse gas emissions is climate change and its repercussions, or that their water bill includes the costs for treating drinking water that has been contaminated with fertilizers. True cost accounting not only calculates the price of a foodstuff based on its direct production costs but also expresses how the foodstuff impacts ecological or social systems in monetary terms. When this scientific method is applied to food prices, consumers see the actual price of their food – not just at the checkout, but everywhere else – and this helps them to understand what long-term effects individual products are having not just on their wallet, but on the health of the planet as well.

Overview of the unweighted true-costs calculation by the University of Augsburg
 

Food

Type of Production

True Price Gap

Apple

Conventional (organic)

8% (4%)

Banana

Conventional (organic)

19% (9%)

Potato

Conventional (organic)

12% (6%)

Tomato

Conventional (organic)

12% (5%)

Mozzarella

Conventional (organic)

52% (30%)

Gouda

Conventional (organic)

88% (33%)

Milk

Conventional (organic)

122% (69%)

Mixed meat

Conventional (organic)

173% (126%)

 

About PENNY:

In 2019, PENNY employed around 28,000 people in approximately 2,170 stores in Germany alone and generated turnover totalling 7.6 billion euros.