Dairy firms in Vietnam start skimming after crackdown

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Some Mead Johson formula products for children, which will soon be joined by others of similar content but higher prices, its distributor says. Photo courtesy of Tuoi Tre 

The Vietnamese government's plan to impose a one-year dairy price cap has led milk firms to start skimming.
Thuy Hoa, an Abbot customer in Ho Chi Minh City, said she has heard that the can of milk powder she feeds her child, Pediasure B/A, will shrink from 900 grams to 850 grams, even as its retail price remains VND600,000 (more than US$28) per can.
“By cutting 50 grams of milk from each can, they’re raising the price by some VND34,000,” Hoan told Tuoi Tre last Sunday.
She said she wants to switch to a different formula, but worries it will be hard for her child to get familiar with a new taste.
Do Thai Vuong, the diplomatic director of Abbott Vietnam, said the content reduction is only part of the company’s strategy to “standardize” packaging in the region.
“We always follow the laws and price regulations in every market, including Vietnam,” he said, noting that such efforts are "normal" for any company.
A shop owner in Ho Chi Minh City said he's already received a note from 3A, the sole distributor of Abbott in Vietnam, notifying him of a change in package size for several product lines.
The move, he said, will technically push their retail prices up by more than 5 percent.
Mead Johnson, meanwhile, won't change its container size but will add new products and raise prices by some 10 percent, according to shop owners who said they'd heard the information from the official distributor, Tien Tien.
Th director of a milk powder import company, who wished to remain anonymous, said dairy firms use different tricks to circumvent price management.
They've changed their packaging to make an old product new, changed portion sizes or watered down their liquid formula.
"So in order to do good by the consumers and force dairy firms to compete fairly, the government shouldn't just manage prices, they need to regulate the product itself.”
Economist Ngo Tri Long said every new product has to be registered with the Finance Ministry, which is supposed to check all cost matters including input prices and advertising expenditures.
If a company manages to dodge price management, it means the authorities aren't doing their job, Long said.
Prime Minister Nguyen Tan Dung agreed with the Finance Ministry’s plan to force dairy firms to maintain prices on products designed for children under six at a government meeting on April 29.
The plan will extend a moratorium on price hikes for six months and implement a one-year cap in price hikes.
The plan was passed after investigations revealed that the five largest dairy firms Mead Johnson, Nestlé, FrieslandCampina Vietnam, Vinamilk and 3A, had raised prices by up to 30 percent per product since last December despite profits of an average of 23 percent last year.
The investigation revealed that the five firms sell 90 percent of dairy products for the children in Vietnam.
Investigators fined Nestlé VND45 million for failing to report some of the new prices and collected more than VND10 billion in back taxes from others.
Economist Long felt the punishment was too light.
He believes that the public could reasonably question the integrity of the authorities given the "improper" timing of their recent announcement.
The findings of the government's report were made public on April 30,  just as the public began a five-day holiday break on April 30.
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