Survey of San Francisco Bay Area shows milk price gouging


FOR IMMEDIATE RELEASE
Wednesday, July 28, 2004
FOR MORE INFORMATION:
Elisa Odabashian
415-431-6747

SUPERMARKET CHAINS CHARGE HIGHER PRICES FOR MILK THAN
MOM & POP GROCERY STORES, CONSUMERS UNION REPORT SHOWS
San Francisco Bay Area Pays 28% Higher Than National Average for Gallon of Milk

SAN FRANCISCO, CA – Large supermarket chains – particularly Albertsons – charge the highest price for milk in the San Francisco Bay Area according to a new report by Consumers Union, which found that consumers could find cheaper prices at neighborhood mom and pop stores and smaller chains. The survey found that the average retail price for a gallon of whole milk at supermarkets in San Francisco Bay Area was $4.71 or 28 percent higher than the $3.66 average price documented by the U.S. Department of Agriculture in its survey of 29 major U.S. cities outside California.
“California produces more milk than any other state in the nation and yet consumers here pay the highest prices,” said Elisa Odabashian, Senior Policy Analyst for Consumers Union’s West Coast Office. “Our survey shows that big grocery supermarkets are gouging consumers and earning huge profits from this important family grocery staple.”
Consumers Union surveyed milk prices in 83 food stores in the Bay Area counties of San Francisco, Alameda, Marin, and San Mateo from June 14-18, 2004. The study found that gouging by grocers, particularly supermarket chains, continues to be a primary cause of high milk prices. A copy of the report is available online at: http://www.consumersunion.org/pdf/milkrpt04.pdf
Consumers Union found that consumers could find cheaper prices – as much as $2.20 less for a gallon of whole milk — at neighborhood grocery stores and smaller chains. For example, Cala Foods in San Francisco’s Mission District charged $4.99 for a gallon of Clover brand whole milk and $4.39 for a gallon of Ralph’s brand whole milk, while Casa Maria’s California Fruit Market, less than a block down the street, charged $3.49 for a gallon of Foster Farms. Albertson’s in San Mateo charged $5.49 for a gallon of Berkeley Farms whole milk, while La Raza Market in San Mateo charged $3.75 for the exact same brand of whole milk. In Berkeley, Andronico’s Market charged $5.05 for a gallon of Clover brand whole milk and $4.89 for a gallon of Berkeley Farms whole milk, while Mi Ranchito charged $3.29 for a gallon of Berkeley Farms milk.
“It makes no sense that the big supermarkets charge customers so much more for milk than many mom and pop stores,” said Odabashian. “The smaller stores pay higher costs per gallon for moving a smaller volume of milk and many of the big supermarket chain retailers are also milk processors so they should be able to charge less because they cut out the middleman.”
The survey documented a wide gap between the price farmers are paid for milk and the retail price that consumers pay. At the time of the survey, the farm price for a gallon of whole milk was $1.90 and the California Department of Food and Agriculture estimated that retailers paid an additional $1.00 per gallon for processing, distribution, and store costs, bringing the total cost to $2.90 for retailers. Consumers Union’s survey showed that Albertson’s charged $5.49 per gallon at most of its locations for its Berkeley Farms brand of whole milk or $2.59 more than cost (an estimated 89 percent profit), while Safeway charged $4.79 for its Lucerne brand of whole milk or $1.89 more than cost (an estimated 65 percent profit). Cala Foods and Mollie Stone’s charged $4.99 for a gallon of Clover brand whole milk or $2.09 more than cost (an estimated 72 percent profit).
Since Consumers Union conducted its price survey in June, the farm price for a gallon of whole milk has gone down – dropping to $1.58 on July 1. However, when Consumers Union returned at the end of the first week in July to the major supermarkets surveyed in June, retail prices remained roughly the same. By July 20, when Consumers Union returned to the stores for another spot check, the retail prices at major supermarkets in the Bay Area had dropped between 20-50 cents per gallon.
The June 2004 survey showed that the gap between the farm price and the retail price grew wider compared to the last time Consumers Union surveyed milk prices in 1999. In January 1999, the farm price for northern California was $1.65 per gallon for whole milk. Major retailers, such as Lucky (now Albertsons), Safeway, Cala Foods, and Mollie Stones, charged between $3.75 and $4.25 for a gallon of their highest priced whole milk. This represented a farm-to-retail price differential ranging from $2.10-$2.60 per gallon, or 127-158 percent. By contrast, in June 2004, the farm price was $1.90 and major retailers charged $4.79 to $5.49 for a gallon of their highest priced whole milk. This represents a farm-to-retail price differential ranging from $2.89-$3.59 per gallon, or 152-241 percent.
“It’s unfair to blame the high cost of milk on dairy farmers who have struggled to make ends meet in recent years,” said Odabashian. “Our research has shown that retailers are always quick to jack up prices on milk when the farm price goes up, but are often slow to pass on savings to consumers when the farm price drops. While it is encouraging to see retail prices drop in July as the farm price has come down, major supermarkets are still earning hefty profits on milk.”
The Consumers Union report notes that one of the reasons California milk prices remain high is because retailers are prohibited by a law adopted in the late 1960s from selling milk below cost. While the original intent of this law was to stabilize a volatile dairy market and create a more level playing field for dairy retailers, it now stifles competition and gives retailers a legal excuse to keep prices high. Most states don’t have similar laws on the books and Consumers Union has advocated for its repeal in California so that grocers would have the opportunity to use milk as a low-priced inducement to shoppers.
See report here.
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