Why can a bottle of water cost two to three times more in the West Indies than in France?

It's a tweet that caused a lot of reaction: on November 28, @WayouYouYou posted a photo of shopping done in Martinique in one of the stores of a French retail group, receipt in support. For 19€94, she offered herself four products: garbage bags, sanitary napkins, a kilo of basmati rice, and salad. In response to this post, several other users of the social network shared the contents of their shopping cart and the associated price.

In the midst of a health crisis, and while Guadeloupe is experiencing regular cuts in running water, other Internet users had looked at the price of mineral water: a pack of six 1.5 liter bottles of Evian can cost up to €10.90 in the Caribbean archipelago. A price that varies, depending on the brands and the size of the stores, in the Caribbean archipelago as in France. However, this price difference can also be seen on online delivery sites. For the same product, mineral water from a major French brand, the price displayed ranges from €0.35 per liter in France to €0.80 per liter in a store of the same brand in Guadeloupe.

Cash receipts: what differences?

The last major movement against the high cost of living in the West Indies dated back to January and February 2009, when a major general strike paralyzed Guadeloupe for 44 days and Martinique for 38 days. Since then, in 2015, a survey by the National Institute of Statistics and Economic Studies (INSEE) has listed the average price differences between the overseas departments and France:

It should be noted that these price differences are much greater for food products. Differences which in 2020 reached "+ 40% in Reunion and + 50% in Martinique, according to the ESEC, which weighs particularly on the basket of the most modest households." Because, everywhere, food products represent one of the main items of household consumption.

Where do such price differences come from?

Importing products into overseas departments generates additional costs. For example, to the price of a bottle of mineral water purchased from a supplier in France are added charges such as freight, taxes or local transport.

♦ MarginsIn 2019, the Competition Authority sought to establish the impact on the prices observed in the DROMs of the margins achieved by the various distribution players: distributors, shipping companies, ports, handlers, freight forwarders, wholesalers. In a 180-page opinion, the organization concludes that, rather than the margins of a particular link, it is "the accumulation of the margins of the actors of the whole chain of consumer products which can explain part of the price differences with the mainland". Thus, the data collected suggests that on their own, "the margins achieved by certain distributors are not, on average, the cause of most of the price differences between DROM and France, even if their impact may be more significant at the level of a specific product".

♦ Importing wholesalers The use of importing wholesalers - "often necessary given the services provided on their behalf" affirms the Competition Authority, which gives the example of storage, shelving and commercial animation - also represents in average 16% of the cost. For a bottle of mineral water purchased for €1, this represents an additional 16 cents.

♦ DistanceThe Autorité de la concurrence insists on the part played by geographical distance in the final price of a product, emphasizing that approach costs represent, on average, 16% of the cost of a product for a distributor . They correspond to maritime transport, dock dues, various taxes and costs related to the use of different service providers for imports. For a bottle of mineral water purchased for €1, this is again equivalent to an additional 16 cents.

The proportion of approach costs in the final cost varies from one product to another. For low value-added products like a bottle of water, the weight of freight charges may be heavy. "Thus, the cost price of mineral water more than doubles with the simple taking into account of the freight, notes the Autorité de la concurrence. There is an explanation for this: the invoicing of the containers is fixed and independent of the value of the product. It therefore applies in the same way to a bottle of water and a bottle of champagne." In the end, all approach costs included (freight + dock dues + local transport), the price of a bottle of mineral water is multiplied by 4, against 1.3 for a bottle of champagne.

♦ Other costs Less obvious according to the Autorité de la concurrence, factors such as personnel and real estate would also contribute to the higher prices offered to overseas consumers. The distributors questioned mention, for example, the climatic conditions specific to overseas territories requiring "special installations to ensure the preservation of certain foodstuffs or even to degrade certain installations and equipment more quickly, (...) more maintenance due to the geography roughest of these territories and the degraded state of certain roads (...)"

Dock dues called into question

Dock dues are, on average, the leading cost item in approach costs. This is a tax applied in the departments and regions of Guadeloupe, Guyana, Martinique, Mayotte and Reunion. On paper, it aims to support local economies by taxing imported products when similar products are also produced in the territories in question. The objective is to promote the consumption of local products over that of imported products. However, today it is also applied to products that are not produced locally.

Criticized, the dock dues were the subject of a report commissioned by the government which recommended its abolition, describing it as an "inefficient tool". This recommendation provoked strong reactions in the territories concerned because it is a significant resource for local authorities. Dock dues constitute an essential revenue for the overseas departments (DOM) which amounts to 1.017 billion euros per year (average 2008/2014), explained the Senate in 2015. Parliament ended up vote unanimously for its maintenance on May 18, 2021. The system has thus been extended for five years.

♦ And for a bottle of water bought in Guadeloupe, how much? For "natural mineral waters, not added with sugar or other sweeteners or flavored, without carbon dioxide", a bottle imported into Guadeloupe will be taxed at 20% in accordance with the dock dues rate in force in 2021, while water produced in Guadeloupe will be taxed at 2.5% (the maximum rate authorized for the so-called "regional" dock dues).

The dock dues rate is set by the Region (or the Departmental Council in Mayotte). It varies according to the territories, and there is a list of exemptions (that of Guadeloupe can be consulted here). The rate is different depending on whether it is imported products or local production, but also depending on the type of product or service: basic food products, infant milk, medicines, sanitary equipment or diesel for fishing sailors, or luxury goods or tobacco...

https://www.regionguadeloupe.fr/fileadmin/Site_Region_Guadeloupe/Annonces_legales_et_deliberations/2019_DELIBERATION_CR19-1320_du_23_DECEMBRE_2019_-_DISPOSITIF_D_EXONERATION_D_OCTROI_DE_MER_2020.PDF