The costs dairy producers and distributors pay for advertising and marketing are too high, which has been pointed out as the main reason behind the sky-high prices.

The Ministry of Finance (MOF) in late November completed an inspection on dairy products’ prices and came to the conclusion that the overly high advertising expenses have pushed the prices up. It believes that it is time for producers to cut expenses to slash sale prices.

The inspection tour was taken after domestic consumers complained that they have to pay too much for dairy products. Local newspapers pointed out that while the world’s material price decrease, the sale prices of finished products in Vietnam remain sky high, thus burdening consumers. Some newspapers quoted experts saying that dairy products’ prices in Vietnam are the highest in the world.

The MOF’s inspectors found out that in 2008, Nestle Vietnam used 20.5 billion dong out of 32 billion dong in sales expenses for advertisements.

In the first six months of 2009, the company’s sales expenses was 29.8 billion dong, accounting for 59.2 percent of total expenses, while the expenses on advertisement accounted for 27 percent of total expenses.

As for Mead Johnson Nutrition Vietnam, in 2008, the expenses on advertisements and marketing accounted for 53 percent of total expenses. The expenses accounted for 36 percent of total expenses in the first half of 2009.

While the import price, the import tariff and VAT policies remain stable, the expenses on advertisements and marketing tend to increase.

The MOF’s inspectors found at Tien Tien Company, a distributor, that the sales expenses on total expenses of the first six months of 2009 increased to 85 percent from 62 percent in the first six months of 2008, of which the expenses on advertisements and marketing increased from 21 percent to 42.7 percent.

Under the current regulations, the expenses on advertisements and marketing at less than 10 percent of total expenses are recognized as reasonable expenses when calculating tax. However, in fact, enterprises spend much more than the allowed level.

The MOF has requested dairy producers and distributors to define and make publi the prices of each dairy product to consumers, and cut down unnecessary expenses.

In August 2007, the MOF inspected five enterprises in HCM City, including Vinamilk, Dutch Lady Vietnam, Nutifood, Tien Tien and some other companies in the north. The inspection tours also led to the conclusion that unreasonable expenses pushed the sale prices on the market.