Vietnam's foreign dairy prices remain high despite federal request

Instead of cutting prices as requested by the Ministry of Finance, foreign dairy producers in Vietnam launch promotional campaigns while maintaining high prices.

After inspection tours to foreign 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% on four lines of children's powdered milk by reducing expenses for distribution and strictly following regulations that prohibit advertisements for powdered milk for infants less than one year old.

Meanwhile, other dairy producers have stepped up advertisements. Instead of easing prices, they launched many promotions. Mead Johnson, for instance, offers dairy products as gifts, allowing customers to save 31% of total cost.

Friso increased the weight of its cans to 1.5 kilogrammes while maintaining the original price, allowing savings of up to 20%. Abbott has also increased the weight of its cans from 900 grams to one kg while preserving the same price.

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

Vietnamese consumers often suffer from high prices of foreign dairy products. Most big dairy groups set up their factories in Thailand and Malaysia, allowing them to sell products to all of Southeast Asia while enjoying preferential tariffs under ASEAN, said Nguyen Tuan Khai, deputy chair of the Vietnam Dairy Association.

''We should open doors to all foreign producers, with no discriminatory treatment for ASEAN producers. This way, dairy producers will have to compete with each other and the competition will force the prices down. It is unfair to force domestic players to register prices with government agencies, while foreign players are exempted.'' Khai asserted.

Dairy prices in the second quarter of 2010 are predicted to increase in early June due to high import material prices, while demand for dairy products rise sharply at the beginning of summer, according to the Industry and Trade Information Centre.