Milk price hits 10-year low as retailers use the product as loss leader

TOKYO, March 26 – Retail prices of milk remain low, with the government statistics showing the price of a 1-liter milk carton posting a 10-year low of 208 yen in Tokyo in February. This is because supermarkets, eager to attract customers amid rising wholesale prices of food products, are making milk the loss leader, given its high frequency of purchase. In an effort to rectify such bargain sales, the farm ministry started working on compiling a guideline for milk sales by the end of this month.

Tokyu Store, a supermarket chain in Tokyo’s Meguro Ward which operates 81 stores in the Kanto region, cut prices of two milk products at all of its stores starting this month. The prices of two main products, sold at 198 yen and 228 yen excluding tax, were cut by 13 percent. The supermarket chain conducted price cuts for 2,000 food and everyday items in March, and set milk as the best bargain.

“As prices are rising for many food products, we hope to attract customers by cutting prices of some of our products,” said a Tokyu Store official. Discounting items which are consumed daily is effective to draw in customers and it is easier to advertise low prices for milk, the firm said.

According to the retail price survey by the internal affairs ministry, the price of milk in the Tokyo area was 208 yen in February, down 6.7 percent from a year before. The regular price of milk used to be above 220 yen, but it has been declining since last fall, and the February figure marked the lowest level since March 2008 in terms of price excluding tax. “Major supermarkets with large sales are also stepping up discounts and the trend is spreading nationwide,” said a dairy industry official.

Prices paid to dairy farmers who provide raw milk have not changed largely so far, but there are concerns that prolonged low retail prices could affect the prices of raw milk in the future.

To prevent sales of milk at unreasonably low prices, the farm ministry has conducted inquiry surveys on manufacturers and retailers of dairy products and plan to compile a guideline as early as this month to encourage milk sales at appropriate price ranges. It is the second time for the ministry to create such a guideline for the food manufacturing sector, following the one for tofu and fried tofu.

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