Bright Dairy announced it is raising the price of some fresh milk and yogurts starting Dec. 18 with a weighted average growth rate of about 5%.

According to Bright Dairy, a local dairy industry giant, the main reason for the price increase is the growing price of raw materials. This price adjustment is likely to affect company’s sales in 2013, said Bright Dairy.

The price adjustment was just announced after a recent tariff adjustment. China’s Ministry of Finance announced on Dec. 17 the tariffs on special formula baby milk powder and baby retail food will be halved to 5% after the previous tariff reduction on Jan. 1 this year. However, the prices of imported milk powders are increasing despite the reduction of tariffs. Moreover, it seems that Chinese consumers don’t believe that the price of imported milk powder will be reduced.

“The tariff is not the main reason for the high prices of imported milk powders in China,” said one netizen.“So the tariff reduction would change anything.” “Excuses to raise prices such as increasing cost and formulation optimization play a more important role in the decision of milk powder prices,” said Guo Hong, a citizen in Chengdu.

Data from the China Chamber of Commerce of Foodstuff and Native Produce reveals that imported milk powders have taken over 50% of the Chinese milk powder market and over 70% in high-end milk powder market.

“Distributors are making use of the trust crisis of Chinese consumers to local milk powders to raise retail prices,” said dairy expert Wang Dingjin.

Source: Morning Whistle Dec 2012

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