Press Release May 6, 1998	Contact: Elisa Odabashian, Policy Analyst 415-431-6747 Consumers Union West Coast Regional Office

THE LAND OF MILK AND MONEY:
SAN FRANCISCO BAY AREA RETAILERS
CHARGE TOO MUCH FOR MILK

Supermarkets Charge More For Milk
Than Do Many Mom-and-Pop Markets

SAN FRANCISCO, CA -- Supermarket chains continue to charge among the highest prices for milk in the Bay Area – up to $1.36 (or 55%) more per gallon at San Francisco supermarkets than at many neighborhood Mom-and-Pop markets. In April, Consumers Union, nonprofit publisher of Consumer Reports, surveyed milk prices in 60 food markets in four regions of the Bay Area and found that gouging by grocers, particularly supermarket chain retailers, continues to be a primary cause of high milk prices.

"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 the highest prices for milk."

A survey of stores in the Mission District of San Francisco provides an example of the difference in milk price between large supermarket chains and small stores in the same neighborhood. The Cala Foods charged $3.85 for a gallon of whole milk, while California Food Market just a few blocks away charged $2.49 per gallon, 23rd and Mission Produce charged $2.59 per gallon, and Rainbow Grocery charged $2.88 per gallon.

Consumers Union’s last survey of milk prices was conducted in November of 1997. Since November, the price dairy farmers receive for a gallon of milk increased $.07, while most supermarket milk prices increased $.10-$.16 per gallon.

"Farmers are often blamed for the high cost of milk," Odabashian said "But the real culprits are grocers, particularly supermarkets, who use even a penny increase in the farm price as an excuse to raise the price of milk to consumers exponentially. Retailers seldom lower the price of milk when the farm price drops. The cumulative result, over time, is a growing spread between the price farmers get for their milk and the price consumers pay at the checkout stand."

Another notable finding of the report is the uniformity of milk prices at the major chains. Supermarkets’ milk prices nearly match one another within each county, pointing to an absence of competition in the marketplace on milk. Most of the large chains matched each other at $3.85 per gallon of whole milk in San Francisco, $3.35 or $3.38 in the East Bay, $3.35 to $3.39 on the Peninsula, and $3.38 or $3.39 in Marin county. The report also highlights a conspicuous absence of milk price-cutting and advertising by the supermarket chains.

"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 stated. "Consumers Union has long maintained that there is insufficient competition between the big retailers on the price of milk."

The Bay Area’s 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 not 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 contends. "When food dollars are wasted on excessive milk prices, poor children get less food to eat."

[Editors: To receive by fax a copy of the 9-page report, with 4 pages of graphs, call Consumers Union at 415/431-6747.]