February 7, 2008

Philippines' Alaska Milk Corporation mulls price reduction as it screens local milk situation

Market factors may trigger further milk price hikes in the Philippines as it continues to put pressure on manufacturing companies like Alaska Milk Corp., its chief executive said.

Alaska Milk president and chief executive officer Wilfred Steven Uytengsu Jr. said the company will still try to mitigate costs despite apparent strains on the local milk market.

Uytengsu cited that three major factors influence the price of his company's milk products: liquid and powdered milk, the former of which is included in the basket of consumer goods and reflect inflation, as well as purchasing power.

Aside from the sluggish demand, the drought in dairy-producing countries New Zealand and Australia is putting a dilemma on prices.

Likewise, he noted that fuel and oil have not gone down which has added more woes to the industry. Moreover, Uytengsu cited that tinplate prices have gone up by 10 percent but they are "trying to manage these things as we try to gain more market share."

Monetary officials announced that headline inflation rose to 4.9 percent year-on-year in January from 3.9 percent in December last year.

However, the Bangko Sentral ng Pilipinas identified inflation pressures "came mainly from higher rentals and elevated prices of food items--led by fruits and vegetables, fish, miscellaneous foods, cereal preparations and meat -- and transportation and communication services."

Uytengsu is confident that 2007 sales last year to go up from the total 2006 sales of P6 billion.

The company said in its latest financial report that "net sales for the first nine months [of 2007]  grew by 50 percent to P6.222 billion from P4.158 billion in the same period last year."

Uytengsu credits this to the company's sustained marketing campaign, especially during the third quarter of last year going into the peak Christmas season.

In a statement, Alaska Milk says the growth was due to combined sales volume of the company's liquid canned-milk business posted high double-digit growth rates year-on-year on account of the strong off-take of the Alaska brands, as well as the additional sales volume generated from the acquisition and licensing of Nestle's liquid canned-milk brands.

He added they also would likely stick with capital expenditures of between P200 million and P400 million this year.

The company has increased prices in June and September last year.

Uytengsu said they are targeting Filipinos abroad especially in Canada.