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Milk prices excessively high, customers partly to blame: Experts
Milk products in Vietnam are unreasonably expensive, experts say, adding that local consumers may be paying the price for their own “expensive is good” mindset.
Ho Tat Thang, Vice Chairman of the Vietnam Standard and Consumer Association (Vinastas), said at a conference in Hanoi last week that although global dairy prices and import tariffs fell last year, the prices of milk products have continued to rise in the domestic market.
“Several imported milk products are being sold at the highest prices in Vietnam,” Thang said, pointing out that fresh milk retails at US$1.40 a liter in Vietnam, compared to $1.10 in China, 50 cents in India and 50-90 cents in the US and Europe.
Milk prices on the global market have dropped more than 40 percent since they peaked in the third quarter last year.
Powdered milk is imported to Vietnam at around VND60,000 ($3.37) a kilogram, after tariffs. Experts said after vitamins, DHA and other ingredients are added and all overheads included, the reasonable price of formula milk should be around VND100,000 ($5.60) per kilo.
However, locally branded formula milk now retails at VND143,000- 165,000 ($8.04-9.20) per kilo while products of foreign brands cost VND305,000-425,000 per kilo.
“That is too much,” Thang said.
Statistics from Vinamilk show that the domestic dairy market was worth VND8 trillion ($458 million) last year, with foreign producers holding an 80 percent market share.
Experts said dairy firms, especially in the upscale products segment, always try to compete with each other by advertising that their products have more ingredients to bolster children’s immune systems and intelligence.
Tran Ngoc Dung, an expert at market research firm FTA, said many consumer studies in the 2007-2008 period showed that all parents, irrespective of their income level, tend to choose expensive dairy products that are advertised to have many nutrients.
Local consumers believe that expensive milk can make their children healthy and smart, Dung said.
According to FTA, although the imported materials used in formula milk products of different brands are almost the same, prices of the so-called high-end products are proportionally much higher.
The firm also said consumers judge the quality of milk products based on their packaging, brand names and how expensive they are. This mindset has widened the price gap among milk products, it said.
Hoang Thuy Tien, deputy head of the Vietnam Food Administration, said preliminary figures show that 30 percent of commercials on television right now are about food products. The high advertising costs contribute to the continuing hike in milk prices, he said.
Tran Huu Duc, External Affairs Manager at local dairy firm Nutifood, said foreign dairy firms often organize events and conferences to increase consumer confidence in their products.
“Milk prices in Vietnam are not calculated based on the cost price,” said Tran Bao Minh, Deputy General Director of Vietnam Dairy Products Joint Stock Co., or Vinamilk.
“Instead prices are determined by which market segment the products are in and by the perception of consumers about brand names,” Minh explained. His company accounts for 15 percent of the domestic dairy market, the largest share among local dairy producers.
Raf Somers, Chief Technical Advisor for the Vietnam Belgium Dairy Project, said the unreasonably high prices of milk products have resulted in low milk consumption in most of Vietnam.
Hanoi and Ho Chi Minh City account for about 10 percent of the country’s population but 70 percent of the total milk consumption, which means 90 percent of people in Vietnam do not drink or drink very little milk, he said.
Still, as personal incomes increase, the demand for powdered milk in Vietnam could double in 2011, making the dairy market even more lucrative, Somers said.
The current annual growth rate of the market is 14 percent.
thanhnien, agencies
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