Milk powder prices to go up soon

Milk food prices will rise by at least Rs.35 next month, as the Consumer Affairs Ministry confirmed it will allow milk food companies to raise prices due to the increasing world market prices and the depreciation of the rupee. The Ministry Secretary R.M.K. Ratnayake said milk food companies, Ministry officials, the Consumer Affairs Authority (CAA) and the Treasury would meet tomorrow to discuss a suitable price increase.

“The July agreement to increase prices to Rs.195 will end in two weeks so we will look into any new proposal that the companies put forward,” he said. Dr. Ratnayake said the Treasury together with the CAA and the ministry would see what needs be done to protect the consumer while allowing the companies to operate in a suitable environment.

Fonterra Brands Lanka director Roshan Kulasuriya told the Sunday Times that when the CAA approved the price of Rs. 195 for a 400gm pack of milk powder in July, milk food companies were aware it would not be sufficient as world market prices demanded a higher pricing. Fonterra Brands Lanka imports popular milk powder brands such as Anchor and Raththi.

“In July we requested a price of Rs. 230 for a 400 gm pack, but the CAA only approved a Rs. 15 hike which was insufficient,” he said. Mr. Kulasuriya said the parties agreed to desist from price increases for two months from July. This agreement ends this month and Fonterra hoped for a 35-rupee increase for a 400 gm pack.

Since March this year world market prices of milk powder have increased from US$ 2,700 for a metric tonne to about US$ 4,000. This is a 48% increase within just six months.“This is a steep increase which has a direct impact on milk food prices in Sri Lanka and after the agreement with the CAA ends, Fonterra will survey the possibilities of getting the price upto to at least Rs.230,” he said.

Lanka Milk Foods Ltd (LMFL) marketing director Lal Sarnapala said LMFL, which imported Lakspray, will push for a price increase of Rs.100 after the present agreement lapses. He said previous price increases permitted by the CAA have never been sufficient and LMFL would need such a price increase if it hoped to remain competitive.

Meanwhile, public concern over the shortage of milk foods is rising as many popular brands have stopped operations due to government control over pricing. Popular brands such as Maliban, Diamond and Kotmale were forced to cease operations, claiming that the price increase permitted by CAA was insufficient.

Sri Lanka consumes some 5,000 metric tonnes of milk powder a month while Fonterra Brands Lanka imports about 3,000 metric tonnes a month. Mr. Kulasuriya said the withdrawal of some brands from the market would increase the demand for brands imported by Fonterra.

“We control more than 50% of the market and when other companies withdraw their products the consumers will buy what is available in the market,” he said. He said milk food stocks were running dangerously low and that Fonterra was under pressure to increase supplies.