Baby formula prices continue to rise

Despite a lot of efforts by government agencies to force baby formula prices down, prices have been rising due to Vietnamese mothers’ preference for foreign-made formula rather than domestically-made products.

Dairy prices have increased two times so far this year, and are selling at very high price levels despite complaints from consumers. It seems that producers do not worry that the price increases could lead to lower sales because they understand mothers prefer foreign-made products to domestic ones.

VnMedia reporters conducting a small survey found that most mothers think foreign-made products are higher quality and safer for their children.

This helps explain why formula distributors have raised the retail prices higher and higher. Meiji formula No 1, for example, is selling at 362,000 dong, while Meiji No 2 is selling at 344,200 dong per 900 gramme box. Danish Milex brand powder milk is selling at 356,000 dong pe 900 gramme box.

Analysts say that the prices of most dairy products have increased two times so far this year. In February 2010, many dairy producers such as Vinamilk, Abbott, Friso raised the sale prices by 8-10 percent. In March, some foreign producers announced price increases again of 8-10 percent.

The dairy products’ prices are considered ‘unreasonably high’ in Vietnam, while government agencies have been considering measures to force prices down. However, it seems that no proper solution has yet been found.

According to Phan Hong Lien, an expert from Agromonitor, a market survey firm, baby formula prices will continue to increase for many reasons.

First, analysts believe that 2010 will be a year in which dairy products’ prices increase in the world market after a period of crisis. This will certainly lead to a new price hike wave in the domestic market. Dairy products’ price in the U.S. market is expected to increase by 25-35 percent compared with 2009. The sharpest price increases are expected to be seen in fresh milk products (+35-36 percent), skim milk (+ 33.7 percent) and cheese (+ 27.03 percent).

Secondly, prices of animal feed are forecast to increase again as well, as the demand for food rises again after a predicted reversal of the serious global economic downturn of in the last two years.

Third, the domestic sugar market has suffered from a supply and demand imbalance, which has pushed sugar prices up to a 20-year high. This is an important factor that has made the cost of the dairy production increase.

Finally, Vietnam’s finance market has not fully stablized after the difficult period seen in 2009. As the dong/dollar exchange rate continues to fluctuate, the prices of nearly all import products will continue to be affected.

VnMedia

Tags: Baby formula prices in Vietnam, Vietnam Dairy sector