Milk producers said they did not spend a lot of money on advertising and marketing and then pass on the costs to consumers, rejecting findings of a recent inspection by the Finance Ministry.
The ministry announced December 22 that it found dairy companies spending too much on promotion, pushing retail prices up.
According to the ministry, advertising and marketing expenditure accounted for more than 30 percent of their total costs, much higher than the 10 percent ratio allowed by the government.
As a result, the Finance Ministry has asked milk producers to cut back on advertising and marketing so that they can lower retail prices.
An official of the ministry, who wished to be unnamed, told local news website VnExpress that the inspection was carried out carefully in a three month period, and all the findings were comprehensive.
Dairy companies, however, rejected the conclusions.
Vu Quoc Tuan, public relations manager of Nestlé Vietnam, said his company spent limited money on advertising as some of its baby formula products, including Nan and Lactogen, are for children under one year of age, which are not allowed to be advertised in the country.
Tuan also said there are 83 product brands of 50 dairy producers available on the market, which makes the competition really tough.
Prices are mainly determined by the market, not by producers, he said in a VnExpress report .
Enda Ryans, general director of Mead Johnson Vietnam, also said the local baby formula market is highly competitive. In fact his company spent less on advertising than its rivals, he said.
Ryans said retail prices were high because business costs in Vietnam were still high, including high taxes, office rents and training costs. Therefore, the company refused to lower prices as requested by the Finance Ministry.
The Tax Policy Department under the Ministry of Finance said earlier this year that powdered milk prices in the Vietnam have increased continuously. It said that imported powdered milk products have been sold up to 20-150 percent higher than the same products in other countries, including Thailand, Malaysia and Indonesia.
Thanh Nien News