Dairy product prices skyrocketing despite lower purchasing power

VietNamNet Bridge – Consumers are shocked again as dairy product prices have increased by another VND10-30,000/box. The surprising thing is that demand has decreased.

Le Huu Binh, Deputy General Director of 3A Pharmaceutical Company, one of the main distributors of Abbott dairy products in Vietnam, said that the price increase of Pediasure milk for children of 1-10 years old, applied as of November 6, was the decision of the producer.

 

Binh said that this is a new product with new formula, and the products being sold on the domestic market are imports from New Zealand. The import price has increased by 8.45%, from $11.08/can to $15.27. Therefore, the sale price should be VND352,000/can, an increase of VND29,000 over the previous price.

 

“I know the purchasing power on the market is low, but the price increase was not decided by us,” Binh said.

 

He said that the sales of dairy products have decreased by nearly 50%, while traders say that the market will not obtain the expected growth rate this year. Milk shops and sales agents all have confirmed that sales have been very slow for the last two months.

 

Meanwhile, dairy material prices have been on the decrease. Tran Bao Minh, Deputy General Director of Vinamilk, has confirmed that dairy material prices have dropped to the price levels of 2006. However, he said only skim milk has decreased in price, while the price of whole milk remains high.

 

However, experts say that skim milk, not whole milk, is the main material in many dairy products, while whole milk is just used to make food and condensed milk.

 

Also according to Minh, dairy products are not decreasing because tin, labour costs and exchange rates all have increased.

 

Dairy material prices are now  at $2,000-2,500/tonne for skim milk powder and $2,400-2,900/tonne for whole milk, down by over $1,000/tonne over mid 2008.

 

An expert said that the dairy product price increases were expected, as big brand names always launch new products onto the market at the end of the year. Dairy producers are always chasing each other to raise sales prices which they believe can help heighten their positions and polish their images in the market.

 

“One dairy producer announces a price increase, and the move is promptly followed by other producers,” he said.

 

According to the expert, it seems that every six months, dairy producers launch new products with new formulas which consumers cannot distinguish between.

 

Meanwhile, consumers have no other choice than accepting the price increases. Bui Bich Thy, who works for an insurance company, said that she has to purchase Pediasure for her child, despite the price increases, because the child won’t consume other products.

 

Thy said that with the new price of Pediasure, she will have to spend VND100,000 more a month.

 

(Source: Tuoi tre)

 

Update from: http://english.vietnamnet.vn//biz/2008/11/814722/