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Cynthetiq · 07-29-2004, 07:49 AM

Quote:

Bay Area charged higher prices for milk
Consumers pay 29% more than U.S. average in study

George Raine, Chronicle Staff Writer
Thursday, July 29, 2004
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Getting milked? Apparently so. A gallon of milk costs 29 percent more in the Bay Area than it does, on average, across the country, a consumer group reports.

And, the largest grocery chains in the region continue charging the most, getting about $2 more than mom-and-pop shops for a gallon of milk.

It adds up to a big bill for a common, and sometimes necessary, purchase. "Our survey shows that big grocery supermarkets are gouging consumers and earning huge profits from this important family grocery staple,'' said Elisa Odabashian, senior policy analyst for Consumers Union's West Coast office in San Francisco.

In a report released Wednesday, Consumers Union surveyed milk prices in 83 food stores in San Francisco and in Alameda, Marin and San Mateo counties from June 14 through June 18. It found the average price for a gallon of milk was $4.71, or 29 percent higher than the $3.66 average price reported by the U. S. Department of Agriculture in a survey of 29 major U.S. cities outside California.

Shopper Dora Delpozo, a researcher from Oakland, was asked outside the Albertson's store at 5727 College Ave. on Wednesday what she made of the consumer group's report. "It's not good,'' she said. "Women need milk. Kids need milk. Everyone needs milk. And it's expensive. I guess it's ridiculous.''

Consumers Union found that milk can be purchased for as much as $2.20 less per gallon at neighborhood grocery stores and smaller chains. Odabashian said, "It makes no sense that the big supermarkets charge customers so much more for milk than many mom-and-pop stores. 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 producers, so they should be able to charge less because they cut out the middlemen.''

She acknowledged, however, that small stores set milk prices relatively low so customers will be drawn in and buy that and other goods. Small grocery market workers said that's clearly the practice.

At Mi Ranchito Bayside Market in Berkeley, manager Jaime Alejo said a gallon of milk is $3.29, a price that is stable even while his costs fluctuate. "We don't win a lot on milk, but we want to be competitive with any store. Milk is one of the most important things in the market, and we keep it at a price where the customer will keep coming back,'' he said.

At Market La Raza in San Mateo, Ahmed Ali, an employee, sells Berkeley Farms milk for $3.50 a gallon -- he buys it for $3.09. "I buy cheap, and I sell cheap, but that's a good price for customers,'' he said.

In one pricing comparison in the Consumers Union report, the consumer group said Cala Foods' store on Mission Street in San Francisco 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 away charged $3.49 for a gallon of Foster Farms.

Cala Foods is a Ralph's store (owned by Kroger), and spokesman Terry O'Neill had an explanation: "Our milk prices are competitive against the majority of our competitors." He added that Cala Foods offers a range of milk at different prices from different producers. For instance, in San Francisco, Cala Foods was selling Clover brand for $4.99 per gallon; a gallon of Ralphs for $4.39; and in a special, a two-gallon package deal on Ralphs for $5.99.

At Safeway, spokeswoman Teena Massingill said it, too, offers a low- priced brand, Dairy Glen, which is sold as a two-gallon package for $5.99. Since the late 1960s, retailers have been prohibited by state law from selling milk for less than their actual cost.

"We understand milk is an important product for families,'' said Massingill. "We cannot go any lower'' in setting a price for the two-gallon package, she said.

"We would not argue that you can purchase milk a lot cheaper at convenience stores,'' she said, "but go in and buy cold medicine or soup or paper towels, and you will find the price drastically higher. No one is going to do their major shopping at a convenience store. It is cost-prohibitive.''

But it was the $5 per gallon, or more, price for specialty brands in the Bay Area in particular that caught the attention of Consumers Union -- that and the gap between the price farmers are paid and the retail price consumers pay.

"We think (prices are so high in the Bay Area) because consumers will continue to buy milk at any price, and they do not shop around for milk, and they are at the supermarket and they just want to get it done, so they are somewhat complacent in the high price of milk,'' said Odabashian.

Supply and demand, as well as prices set on the Chicago Mercantile Exchange, drive milk prices, which have fluctuated wildly recently after being at rock bottom for two years. About 4,000 dairy farms across the country went out of business between January 2000 and March 2004 because of low prices to farmers, said Jim Tillison, the chief executive of the Alliance of Western Milk Producers in Sacramento, representing dairy cooperatives who market milk for 60 percent of farmers in California.

Still, one of Consumers Union's arguments is that California is the leading milk-producing state -- annually, 35 billion pounds of milk (the equivalent of 4.1 billion gallons, valued at some $4 billion), of the nation's total of 170 billion pounds -- so prices should be more moderate.

The July price to California farmers, set by the state, is $1.58 per gallon, but it will fall to $1.32 on Aug. 1, said Steve Lyle, a spokesman for the California Department Food and Agriculture. A year ago this month, the price was $1.01, the lowest in a year's time, and the record high price was $1. 90 per gallon in June.

Consumers Union complains that as the price to farmers rises, retailers increase the price that much and more, but when it falls they either don't lower the retail price, or they do so only partially, or they're late, said Odabashian.

At the time of the survey, the farm price for a gallon of milk was $1.90, and the California Department of Food and Agriculture estimated that retailers paid an additional $1 per gallon for processing, distribution and store costs, bringing the total cost to $2.90 for retailers. The Consumers Union 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 89 percent profit), while Safeway charged $4.79 for its Lucerne brand of whole milk or $1.89 more than cost (a 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 (a 72 percent profit).

After the price to farmers fell to $1.58 per gallon on July 1, Consumers Union checked to see if the retail prices fell at the stores it surveyed. The report said prices remained roughly the same by the end of the first week in July, and by July 20, during another spot check, the retail prices at major supermarkets had dropped between 20 and 50 cents per gallon.

Consumers Union had this advice to consumers:

-- All brands of milk must meet minimum nutritional standards set by the state, so spending more for milk will not buy higher quality milk.

-- Consumers concerned about milk from cows on which bovine growth hormone has been used should check the milk carton for information. Clover, Berkeley Farms and Trader Joe's brands say their milk is not produced with bovine growth hormone.

-- Families should take advantage of the two-gallons-for-less offers at Costco, Foods Co., More For Less, Smart & Final, Safeway, Cala Foods and Albertson's, which are the cheapest per-gallon prices in the survey, as long as two gallons are purchased at one time.

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Got money?
Average cost per gallon: $3.66 In the U.S.

$4.71 In the Bay Area

How much does a gallon of Whole Milk cost in your neighborhood?

NYC $4.69

I never drink that much milk, so I just buy quarts which is about $.79 I do remember back in the day when I first was tasked with driving errands for the parents 1 gallon of milk was $2 from 7-11 that was almost 20 years ago.