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Press Release |
Contact: Elisa Odabashian, Policy Analyst |
Supermarkets Charge More For Milk Than Do Many Mom-and-Pop Markets
SAN FRANCISCO, CA – Supermarkets in the Los Angeles area and Orange County generally charge among the highest prices for milk in the region, according to a survey by Consumers Union. By contrast, many neighborhood Mom-and-Pop markets in the area charge considerably less than the supermarkets for milk – up to $1.36 per gallon less, a 57% difference. In addition to higher milk prices at supermarkets, there is a uniformity of milk prices at the big chains, all of which matched or nearly matched one another per gallon. Furthermore, the study shows a growing gap between the price farmers receive and the price retailers charge for milk.
Gouging by grocers, particularly large supermarket chains, continues to be the primary cause of high milk prices in the Los Angeles area. Consumers Union’s survey found major supermarkets in the Los Angeles area and Orange County--Ralphs, Hughes, Vons and Lucky--charge $3.71-$3.74 for a gallon of whole milk, while numerous small, neighborhood Mom-and-Pop markets and specialty or discount chains sell milk for under $.3.00 per gallon. Consumers Union, nonprofit publisher of Consumer Reports, surveyed milk prices in 73 food markets in four Los Angeles areas--the San Fernando Valley, Central and West LA, the South Bay, and Orange County – from May 26 through 29, 1998. Consumers Union conducted a limited follow-up survey on July 6, 1998.
"It makes no economic sense for supermarkets to charge more for milk than smaller markets," said Elisa Odabashian Policy Analyst for Consumers Union and author of the report. "The smaller stores pay higher costs per gallon for moving a smaller volume of milk. Furthermore, many of the big chain retailers are also milk processors, so they’ve cut out the profit of the middleman. In short, the supermarkets pay less than the smaller markets to get the milk onto their shelves, and yet, charge consumers among the highest prices for milk."
Consumers Union’s survey found that supermarket milk prices in the Los Angeles area have gone up $.12-$.16 since a survey the group conducted in May of 1997, while the farm price has increased only $.07 during the same one year period.
"Retailers use any increase in the farm price as an excuse to raise the retail price of milk even higher than the farm price increase, and then often fail to pass on to consumers their full savings when the farm price goes down," Odabashian contends. "This practice by retailers, particularly the big supermarkets, makes the gap wider and wider between what dairy farmers get for their milk and what the retailers make. And yet, at the checkout stand it’s usually the farmers who are targeted as the bad guys."
After the May survey was completed, the farm price dropped $.12 in Southern California on June 1. On July 6, 1998 Consumers Union returned to 11 of the supermarkets surveyed in May to determine if farm price savings were being passed on to consumers. Ralphs, which in May had the highest milk prices of the Los Angeles supermarkets, at $3.74 per gallon of whole milk, dropped the price by the full $.12, while Vons and Lucky, passed on only 75% of the farm price saving to consumers.
Another notable finding of the report is the uniformity of milk prices at the major chains. Supermarkets match one another throughout the Los Angeles area and Orange County. In the context of many smaller markets charging considerably less than supermarkets for milk, coupled with the conspicuous absence of typical marketing techniques by the big chains, such as advertising and price-cutting, the uniformity of milk prices at the supermarkets points to lack of competition. As of July 6, 1998, the major Los Angeles and Orange County chains were charging $3.62 for a gallon of whole milk.
"Grocers know that regardless of food budgets, consumers will always need to buy milk. There is no good, reasonably-priced, nutritional alternative to milk, particularly for the healthy growth of children," Odabashian said. "Consumers Union has long maintained that there is insufficient competition between the big retailers on the price of milk, and consumers are hurt by this void."
Los Angeles’ poorest consumers are especially hurt by the high price of milk at the supermarkets. While all of the major supermarkets redeem food stamps and Women Infant and Children (WIC) milk coupons, some of the smaller markets do no accept food stamps, and very few of them accept WIC coupons.
"The poorest consumers know that their coupons will be accepted at the major chain supermarkets. Tax dollars for food stamps and WIC coupons are being spent on the highest-priced milk, enriching the biggest retailers," Odabashian asserts. "When food dollars are wasted on excessive milk prices, poor children get less food to eat."
