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Milk pricing in big supermarkets questioned

| Economic factors

The market position of dairy farmers in South Africa remains precarious, according to Vicci Baker, founder of the price comparison website Retail Price Watch.

The website studied its database regarding the average price of 21 fresh full cream milk products at four large retail chains over a period of 17 months.

“In Checkers Clover was 17.8% more expensive than the house brand, in Pick n Pay 25.2%, and in Spar 21.2%. Clover prices at all supermarket chains, except Shoprite are nudging R30 for a 2 litre bottle," said Baker.
“Prices of smaller processors are much closer to the house brand price: Checkers less than 1% difference, Pick n Pay 7.7% more, and Spar 5.4% more."

Baker therefore claims that, despite a squeeze on producers, supermarket prices have risen.
“Checkers house brand has risen by 24.5% over the 17 months and Clover in Checkers by 14.3%. The price of milk from small producers in Checkers has risen by 4.8%," said Baker.
“Pick n Pay house brand has risen by 4.8% over this period, while Clover in Pick n Pay was up 15.9%. The price of milk from small producers in Pick n Pay has risen by less than 1%."

In Shoprite, Clover increased by 4.8% and small producers by 1.2%. In Spar, the house brand price rose by 7%, Clover by 10% and the small producer prices by 11.5%.

Dr Chris van Dijk, CEO of the Milk Producers Organisation (MPO), said milk processors should seriously consider producer price levels to allow milk producers to maintain production.

Van Dijk stated that producer prices have remained virtually static for two years, while input costs continue to rise. According to figures published by the MPO, the producer price of milk remains about R4.25 per litre.

“Who then is taking the profit if dairy farmers are not, as is claimed by the MPO?” asked Baker. She believes consumers would be more willing to accept higher prices if the value chain could be more transparent.
Retail Price Watch spoke to a regional processor who did not want to be named. According to this processor, supermarkets are 100% in control of the price of milk from the smaller dairies, while the larger producers can set their own prices with the chains.

In response to Baker's allegations, Shoprite Group said its policy is tough negotiation with suppliers – large or small - at all times for the lowest possible prices in the interest of its customers.

"With stringent cost control, managing shrinkage, constant price comparisons and clever sourcing, Shoprite is continuously finding ways to keep prices lower for its customers, a promise that’s been kept for decades and that will continue in the current turbulent economy," the group said.

Pick n Pay could not respond to a request for comment "due to time constraints".

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