Many Saudis have expressed dismay at the increasing price of baby milk powder, something that they say puts a strain on their household budgets. People are now calling on the authorities to rein in prices and take stringent measures against those responsible for price hikes.
Pharmacies are also alarmed at the increasing prices and are calling on the authorities to enact necessary legislation to fix the price of baby milk, as is the case with medicine, according to a report in Al-Riyadh Arabic newspaper.
Some importers of baby milk have recently unveiled plans to increase the prices of baby milk by over 20 percent. They attribute this to a sudden decision by the authorities to lift subsidies from types of baby milk that contain natural flavors such as vanilla, chocolate and honey.
The importers say the price increases are also caused by the financial crisis affecting European countries and the unstable situation of the global economy. Economists, however, are of the view that the unjustifiable hike in the price of baby milk is due to the ineffective monitoring of the market by the authorities, especially after subsidies were recently lifted.
According to some importers, baby milk is subsidized under strict conditions and regulations. This includes subsidies for milk aimed at children aged three and below. Subsidized milk also needs to meet other specifications relating to the percentage of protein and fat in addition to a fixed percentage of vanilla. Nearly 75 percent of baby milk brands available in the market contain vanilla.
Some pharmacists said importers are responsible for the price hike. They add that there are two factors for the differences in prices from one pharmacy to another — the volume of purchase and the companies’ profit margins. The pharmacists note that a large number of citizens have been complaining about the continuous increase in prices and that this has prompted pharmacists to keep invoices of their bulk purchases at hand in a bid to convince customers that the prices are determined by manufacturers and their agents.
Dr. Ali Al-Daggag, an economic expert and consultant, said there is no justification for the current hike in prices because the demand and supply is almost the same. “This hike is the result of the price rise in the global market. There has been an increase in the prices of all foodstuffs worldwide and hence it is natural for this to appear in the local market also,” he said.
Al-Daggag noted that Saudi Arabia imports huge quantities of foodstuffs and medicines for its local consumption. Therefore, fluctuations in the value of world currencies impact prices in the Kingdom. For example, an appreciation of the euro results in a price hike of foodstuffs imported from European countries.
The annual worldwide inflation ranges between 5 and 8 percent, and this is most often cited as a cause for the rise in prices. There are also other factors for the hike in the prices of various brands of baby milk by 20 percent. More importantly among them is a lift in subsidies. However, there are some traders who unjustifiably increase prices whenever there is an increase in the value of the currency of the country from where the product is being exported.
Al-Daggag said the bottom line is that the market is being monitored in an ineffective fashion by the concerned authorities. “This is more obvious after the lifting of the subsidy and lack of supply of alternative quality baby milk brands,” he added.
Yousuf Al-Harithy, head of the committee for pharmacies at the Jeddah Chamber of Commerce and Industry, said pharmacies are not importing baby milk directly but buy from the local agents of baby milk companies. Pharmacies have no option other than to increase prices whenever agents hike prices.
Referring to differences in the prices of the same brand among various pharmacies, he said, “Some pharmacies may have stocks of the product that they bought for the old price while others have paid more for their new stocks. We can notice this even in the case of medicines for which the government has fixed the price.”
According to Al-Harithy, the Saudi Food and Drug Authority reviews prices and makes changes on a regular interval of 18 months. He noted that the leading agents of baby food companies raised prices by 2 to 5 percent in 2011. Nearly 80 percent of baby milk brands available in the local market are exported from two European countries while the remaining is from other countries, he said, adding that no baby milk is produced in Arab countries.
Al-Harithy said teams from the Ministry of Commerce carry out regular inspections to ensure that the prices of foodstuffs, especially baby milk, are in conformity with the ministry’s regulations. Referring to complaints from some consumers that pharmacies are responsible for the increasing prices of baby milk, he said that this is not correct.
“The difference between the buying and selling price is not more than 15 percent. The profit of pharmacies — after meeting various expenses such as the cost for transportation, stocking and the like — is minimal,” he said, adding that most pharmacies are incurring losses and that they simply sell the product as a service to customers.
Al-Harithy urged the concerned authorities to fix the price of baby milk as is done with medicine. “There should be legislation aimed at regulating the importing and marketing of baby milk in a way that averts malpractice. There is a tendency to give a huge amount of money to doctors and nurses for promoting some brands of baby milk, and this amount is eventually levied from the end consumers by increasing prices,” he said while attributing this as a major reason for the price hike.
For example, said Al-Harithy, a certain brand of subsidized baby milk costs the local agent SR5.20 but is then sold to the customer for SR29.50. “This is because the agent takes 15 percent in profit in addition to 20 percent for the cost of importing. The concerned office takes 24 percent and the marketing expense is put at 34 percent. Besides this there are other costs, including the profit margins of pharmacies and other retailers,” he said.
Commenting on the issue, Muhammad Al-Dhayeeb, a Saudi citizen, said the price of baby milk has soared in the recent past. In the absence of strict monitoring, prices are rising exorbitantly, he said. “Those who sell the product know that it is an essential item for citizens. A majority of mothers do not breastfeed their kids either because they are career women or due to health reasons. They, therefore, have no option other than to buy baby milk irrespective of its soaring prices,” he said.
Samah Ali, a Saudi mother, said she tried to change the brand of baby milk that she feeds her child because of the soaring prices. However, her child would not drink the other brand. After a while, the price of this cheaper alternative also increased and so she switched over to the old brand again.
Jamal Haj Qadur, a foreigner, said that consumers face a situation of not only soaring prices but also emergence of a multitude of new brands at the same price. He urged the authorities to review the decision to lift subsidies and enact a law to punish those engaged in price fixing as well as to ensure the quality of products. — SG