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retailers raking it

By unknown | Jan 31, 2008 | COMMENTS [ 0 ]

Zweli Mokgata

Zweli Mokgata

The Milk Producers Organisation has strengthened its resolve to go after supermarket chains for allegedly fixing the price of milk.

The organisation said yesterday that it would be meeting with the Competition Commission to finalise investigations into price fixing by supermarkets.

In response to the investigation into price fixing by milk processors, the MPO has filed an additional complaint against food retailers.

Etienne Terblanche, MPO managing director, said: "Supermarkets are abusing their market dominance and inflating milk prices unfairly.

"We have enough evidence to prove that they are taking profit margins of 47percent while putting pressure on suppliers and producers."

Marina Hanson, Douglasdale Dairy marketing manager, said: "Supermarkets are raking it in by charging premium prices.

"We completely support the investigation and want the farmers to be protected. Retailers are the problem in this industry."

Terblanche said the collusion made it difficult for new entrants to come into the industry.

Over the past 10 years the number of milk farmers has dropped by almost half from 7077 to 3727 last year.

Terblanche said: "Supermarkets have no risk at all. They charge suppliers for shelf space and don't pay for the product for up to 90 days.

"They send back spoilt milk, even if they were the ones who were careless, and they just increase prices whenever they like.

"The suppliers then pass the cost back to farmers (through price cuts). Farmers then have no choice but to absorb their own costs."

Kevin Rainsford, owner of Elandshoek dairy farm in Pretoria, said: "If you make a calculation of costs, you'll find that farmers take the majority of the cost."

Elandshoek produces about 600 litres of milk each day, and sells it to processors for R3,10 a litre.

It costs the farmer R2,06 just to feed the animals without taking into account property costs, electricity and veterinarian costs.

"We eventually make profit once we reach high volumes, but we have to sell all our milk every day otherwise we lose money," Rainsford added.

On the other hand processors can simply use excess milk for a range of dairy products which have a much longer shelf life.

The Competition Commission said it was investigating the case, and would not release further details on the investigation.


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