"With objective impacts arising from gold price, USD price and exchange rate fluctuations, foreign milk distributors in Vietnam make a profit with a rise of just 3 - 5 percent in selling prices,” said Doan Ngoc Lan, Deputy Director of Vietnam Pharmaceutical Joint Stock Company (VNA PHARM).
Still profitable with 3-5 percent price rise
Mr Doan Ngoc Lan pointed out that the increases in milk prices in early February and early March were unreasonable.
He explained that exchange rate fluctuations only take foreign milk companies additional transport fees while other factors remain unchanged.
“The price rise should have been at 3-5 percent other than 20 percent as in reality. With such a small rise, foreign milk importers still make good profits,” Lan confirmed.
Mr Lan analysed that while USD/VND exchange rate rose 9 percent, many distributors of imported dairy raised prices by 15-20 percent. It is too unreasonable.”
He elaborated that in the milk price structure, purchase prices account for only 50 percent of selling prices, taxes and other duties make up for 15-20 percent, administrative costs take up some 10 percent, promotion and advertisement costs account for 10 percent, and the rest is the profit.
Thus, the exchange rate rise of 9 percent will contribute a rise of only about 4.5 percent to selling prices. Thus, it is too unreasonable to raise the selling price by 15 - 20 percent when the exchange rate climbs just 9 percent.
If the selling price was hiked 20 percent, the exchange rate would climb 40 percent. Or, the USD/VND exchange rate would be 27,000 (compared to the before-adjusted rate of 19,000. The exchange on the free market is now just 22,000 dong per dollar.
Consumers are deceived?
VNA PHARM also is a sole importer of French dairies. The company said exchange rate fluctuations does not have much impacts on dairy companies in Europe. Input prices have not changed much and selling prices are not changed much as a result.
The recent change in exchange rate should result in a 3-5 percent rise in selling prices and milk importers should not do this now. The exchange rate rise is not a decisive factor. Hence, the hike of 18 percent in selling price is extremely absurd, especially when the State applies preferential policies on imported milk which is levied only 5 percent import tariff, he stressed.
Currently, milk made by Asian companies is difficult to compete in European markets and its target markets are poor countries.
Apart from irrational rise in milk prices, consumers do not always receive as good milk as committed by importers.
“Children drinking foreign milk do not like breast milk. Production formula is advertised to ‘copy’ breast milk but it contains too high sugar content, which is exposed to high risk of addiction. By adding 5 percent of moisture, they can add 5 tonnes more on every 100 tonnes of milk. This tactic is deceitful to consumers but brings in big profits for distributors,” Lan revealed.
P.V
Vietnamese
