(CN) Discounts withdrawn as dairy products join rise in food prices

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South China Morning Post

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by Stephen Chen

Jul 27, 2007

 

Mainland milk producers have followed in the footsteps of the nation's

makers of instant noodles by effectively raising prices.

And while consumers continue to grapple with the rising cost of living, they

are asking questions about the power of business cartels to manipulate food

and dairy prices.

 

Major dairy companies in Beijing and Harbin yesterday ended all promotional

discounts for milk and other dairy products, forcing customers to pay the

full price.

 

The move was made ahead of a nationwide campaign by the Dairy Association of

China to raise prices of dairy products. The association's members include

the 14 biggest dairy companies on the mainland.

 

The large dairy companies signed an industry agreement about price collusion

last month. Instead of raising the official prices, the producers agreed to

stop offering promotional discounts, gifts and rewards. Because most of

these are long-term schemes, the move equated to a rise in market prices.

 

" We are seeking mutual development, " the industry agreement said. " We are

against harmful competition. "

 

The customer services departments of Mengniu and Yili, the country's two

biggest dairy producers, confirmed they had ended all promotions in Beijing

and Harbin, the two mainland cities which consume the most dairy products.

 

Zhao Yazhi, a manager of the Bonjour supermarket on Guanghua Road in

Beijing's Chaoyang district, said prices for all dairy products had

effectively been raised since Monday.

 

" The price increase is 10 to 40 per cent, and sales have dropped, " Ms Zhao

said. " Milk products are not essential for everyone. People stopped buying

them as soon as the prices jumped. "

 

Beijing Creamery Association director Fan Xueshan attributed the price rise

to the rising cost of breeding cattle in recent years.

 

But Guo Baoming, manager of the Tuonan Cattle Breeding Centre in Shanxi ,

said the prices large dairy firms offered to farmers had not changed in

years, leaving the farmers to cope with the higher cost of raising the

cattle.

 

One supermarket customer said the price rise was intolerable. " It is a

conspiracy... it should never happen in a market economy that prices are

settled by a bunch of businessmen behind closed doors, " she said.