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Formula prices four times higher than the real values
Formula distributors and producers have announced 20 percent price increases for nearly all kinds of their products. Meanwhile, experts believe that a three or five percent price increase would be enough to bring substantial profit to them.
“With the gold and dollar price increases, distributors of foreign formula products just need to increase prices by three or five percent to make a fat profit,” said Deputy Director of VNA Pharm Doan Ngoc Lan.
Lan, when analyzing the formula prices, said that the latest price increases decided by foreign formula distributors are unreasonable. He stressed that the dong/dollar exchange rate adjustment only forces distributors to pay more for transportation fees while other expenses stay the same. Therefore, they do not have to raise sale prices too sharply to make profit.
“It is really unreasonable that the dong was only devaluated by 9.3 percent and formula prices have been raised by 15-20 percent,” Lan said.
In general, the purchase price only accounts for 50 percent of the sale price, while other expenses, including tax, account for 15-20 percent. In addition, the management fee accounts for 10 percent. Distributors have to pay 10 percent for advertisement and promotion campaigns. The remaining amount is the profit for distributors.
As such, sale prices should only increase by 20 percent when the dollar price increases by 40 percent. If so, the dollar price would be traded at 27,000 dong per dollar. Meanwhile, the current dollar price is just 22,000 dong per dollar.
VNA Pharm is also the company which imports dairy products from France. The manager of the company said that the fluctuation of the dollar value has had little effect on dairy producers in Europe. The input material prices have not seen big changes.
Vietnamese distributors regularly import products in complete built cans or boxes. In principle, the finished imports from Europe always bear higher tariffs than the imports from producers in ASEAN countries. Besides, they have to pay money for transportation fees, storage, marketing and management fees.
“Formula importers should not raise sale prices right now. If they have to, they should raise the sale prices by 3-5 percent. The 18-20 percent price increases are really unreasonable, especially when the state applies a preferential import tariff of five percent,” Lan repeated.
Currently, foreign formula products sourced from Asian countries do not have positions in European countries. Most of the dairy producers in Asia are now targeting domestic consumers or consumers in poor countries with low income.
Besides the sharp price increases, consumers now have to use products that do not have the quality as committed by producers. The products have been advertised as similar to breast milk, but the overly high sugar content may cause habit-forming and obesity.
From February 14, milk powder and fresh milk products of Nutifoood available at Co-op Mart have increased by eight percent. Mai Trang, the PR Manager of Saigon Coop said that Nutifood asked to raise the sale prices before Tet holiday, but Co-op only began applying the new prices on February 14.
Friesland Campina Vietnam CPV has also raised the sale prices by 5-10 percent for 20 its products with the trademarks Friso and Dutch Lady. Abbot has made the sharpest price increase of 20 percent applied to all of its products. A 900 gram box of Ensure has the new price of 557,000 dong, an increase of 80,000 dong.
Thai Binh
vietnamnet
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