Citing the higher dong/dollar exchange rate, dairy producers have unanimously raised prices of dairy products by 5-10 percent at the start of the new year. This goes directly against prior Government requests that dairy producers lower their prices and end unnecessary expenditures.

From January 1, 2010, Hancofood dairy products have increased by 10 percent. The distributor of powder milk products from Abbott, 3A Company confirmed that it will apply new prices, with an average increase of 7.4 percent.

Friesland Campina Vietnam, the owner of Dutch Lady Friso, also plans to raise most product prices by 10 percent, and liquid products will rise two percent.

Tien Tien Company, the distributor of Mead Johnson in Vietnam, has also announced increase of 7-9 percent for Enfa A+ series from January 9, 2010.

A Hanoi grocer commented that his shop has applied new prices since January 1, after the shop received the notice from suppliers on increasing prices by 5-10 percent.

Meanwhile, the grocers of Viet Hung new urban area replied that he has received verbal notice from his supplier on price increases, but he is still selling products at current price levels until he receives official notice.

The dong/dollar higher rate (one dollar is now converting to 18,500 dong per dollar) and the State’s decision on a basic salary increase have been cited by dairy producers as reasons that force them to raise prices.

The decision to raise prices was released after the Ministry of Finance called on dairy producers to cut prices. The ministry, after its inspection tours to dairy producers, concluded that dairy products are too high because producers spend too much on marketing.

The ministry found that retail prices of dairy items are now twice their cost to produce. Vietnamese consumers are overcharged because they must bear too many kinds of producers’ expenses, including management fees and advertising expenses.

Experts pointed out that dairy producers and distributors can still raise prices because Vietnamese consumers, who always favour foreign products, accept the high prices. They do not regret money spent to purchase products they think are the best for their children.

Economic analysts say that only Vietnamese consumers can decide dairy products’ prices. They have the right to decide to turn their back on foreign products. Dairy producers will then be forced to slash prices. Otherwise, government management agencies will not be able to compel dairy producers and distributors to slash prices in the market economy.