According to Reuters, the National Development and Reform Commission (NDRC) approved Shijiazhuang Sanlu Group (SSG) to raise milk prices yesterday. SSG's subsidiary, Bright Dairy & Food Co., is the third-largest milk producer in the country, after Mengniu Diary and Yili Co. Bright Diary expects to raise prices by as much as 14% in some regions on fresh milk UHT milk. Why is this important? For two reasons:
1. The NDRC issued a statement back in January stating that all major producers of daily necessities such as dairy, flour, rice, pasta and cooking oil has to gain approval of the regulatory body before raising prices, in an effort to crub the continuously rising domestic inflation. The fact that NDRC is allowing the smaller dairy producer to lift its price ceiling is showing signs that price controls may be working, so as to lax the regulations and allow for some room in price fluctuation.
2. The country's second largest dairy producer, Mengniu Dairy, is a listed company in Hong Kong. Although the company is getting big fanfare from the Olympics (as it did for being the official Chinese space ice cream), even though Yili is the official Olympics sponsor, competitive pricing of its leading products in the dairy industry will affect the market in the long run. Maybe Mengniu should consider raising the price of its 1 yuan ice cream bars.
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