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Foreign dairy producers keep prices high, but launch promotions   2010-04-05 - Tien phong

Instead of cutting prices as requested by the Ministry of Finance, foreign dairy producers are only launch promotion campaigns, while maintaining high prices. 


After inspection tours to dairy producers and suppliers, the Price Control Agency requested that enterprises cut down expenses to reduce prices. To date, only Nestle has responded to the call.


Nestle Vietnam cut prices by 4-5 percent on four lines of powdered milk for children. The price of Lactogen 3, for example, has declined from 131,000 dong to 125,000 dong per 900 gram can, while Lactogen 1 has dropped from 69,000 dong to 66,000 dong per 400 gram can.


Explaining the price decreases, Nestle Vietnam said that it has reduced expenses for distribution and strictly followed regulations prohibiting ads for powdered milk for kids less than one year old.


Meanwhile, other dairy producers have stepped up advertisements. Instead of easing prices, they launched many promotions. Mead Johnson, for example, offers dairy products as gifts.


If people buy Enfagrow A+ and Enfakid A+, they will receive a free 200 gram can. Mead Johnson explained that promotion program allows customers to save 31 percent.


Friso increased the weight of its cans to 1.5 kilos while maintaining the original price, estimating this allowed savings of up 20 percent. Abbott has also increased the weight of its cans from 900 grams to one kilo while preserving the same price.


The Deputy Head of the Price Control Agency under the Ministry of Finance remarked that dairy producers are lowering prices by launching promotional campaigns. These tactics do not lower prices as requested by the Ministry of Finance, but instead they intend to lure more customers.


“We cannot intervene in these cases. We cannot ask them to slash sale prices instead of offering gifts,” Tuan admitted.


Dairy pricing a headache


“It is true that the foreign dairy product prices are unreasonably high, which remains a headache for management agencies,” said Nguyen Tuan Khai, Deputy Chair of the Vietnam Dairy Association. In their first meeting, the association noted that if the current situation cannot be improved, consumers will suffer.


Khai observed that big dairy groups all set up their factories in Thailand and Malaysia, which allows them to sell products to all of Southeast Asia and also enjoy preferential tariffs under ASEAN.


“We should open doors to all foreign producers, with no discriminatory treatment for ASEAN producers. If so, dairy producers will have to compete with each other and the competition will force the prices down,” Khai asserted.


Tuan denied the criticism of foreign associations in Vietnam that the State intervenes too deeply in business operations in terms of pricing. Tuan argued that a fair playing field for both domestic and foreign players must be established. He added that it is unfair to force domestic players to register prices with government agencies, while foreign players are exempt.  


In related news, the Industry and Trade Information Centre under the Ministry of Industry and Trade predicts that dairy prices in the second quarter of 2010 may increase due to high import material prices. Dairy prices may increase sharply in early June, when demand for dairy products increases sharply at the beginning of summer.

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