Baby formula prices soar, consumer protection amendment on horizon

Despite many efforts by the Ministry of Finance to stabilize the market, baby formula prices remain sky high and, now, a new wave of price hikes is cresting.

Dumex has announced new prices for its products, shocking many mothers. As of July 19, prices will increase by 10 percent on average.

Forced to raise prices?

“I cannot understand why foreign dairy producers continue raising prices. I felt very worried when reading the new price list,” offered Nguyen Thi Vui in Hanoi. Vui is concerned that, once one dairy producer succeeds in raising prices, the others will follow.

Danone Vietnam Company provides Dumex and Dulac products. The notice sent to retail shops clearly stipulates that, from July 19, Dumex Mama Gold Step 0 will rise from 212,000 dong/800 gram carton to 233,000 dong. Dugro Gold 2 will increase from 298,000 dong to 328,000 dong. Dugro Gold 3 has a 1.5 kilo carton that will rise sharply by 44,000 dong from 454,000 dong to 499,000 dong.

The price hikes are also applicable to Dulac brand products. Dulac Gold, for example, will cost 30,000 dong more per 800 gram carton.

Danone Vietnam maintained that the dong/dollar exchange rate and material price increases have forced the company to raise prices.

A dairy shop salesperson in Hanoi revealed that South Korean XO brand product prices have also risen by 2.5 percent, while Japan’s Wakobo products have climbed three percent.

Over the last years, foreign dairy producers and suppliers have only raised prices, they have never lowered them. A Ministry of Industry and Trade 2009 survey showed that Dugro 1, 2, 3 products of Dumex in Vietnam were 100-150 percent more expensive than in Thailand, Malaysia and Indonesia.

Market experts claimed that the explanation given by Danone Vietnam is unreasonable, arguing that the dong/dollar exchange rate has been stable for many months, while material prices are low at $3400-3600/ton, less than in 2008.

Consumer protection amendment

Do Gia Phan, Vice Chair and Secretary General of the Standards and Consumer Protection Association of Vietnam, confirmed that the market was once stable, after government agencies undertook noisy inspection campaigns. Now it seems that the watchdog agencies are ‘oversleeping’, and so foreign producers and suppliers are raising prices again.

“Businesses, by nature, try to dodge the laws to seek optimum profits. Therefore, management agencies need to strengthen control and supervision over factors that create prices, or consumer interests will not be protected,” Phan noted.

Deputy Head of the Price Control Agency under the Ministry of Finance Nguyen Anh Tuan pointed out that a new document to amend Circular 104/2008 has been promulgated. If the new circular is enacted, firms that produce and trade products on the list of those subject to price stabilization must register prices with watchdog agencies.

For example, in case of Dumex, before the price hike, Danone would have to explain to the Ministry of Finance.

“Currently, enterprises are not required to register prices, so it is very difficult to manage price rates,” Tuan explained, adding that the draft circular has been submitted by the ministry to the Government.

If the amendment is enacted, unreasonable price hikes will result in fines of 40 million dong at maximum.

According to Tien Phong, the recent price increase waves occurred in February 2009, July, 2009, December 2009 and January 2010. – Tienphong

Tags: Vietnam Baby formula prices