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Meiji, Morinaga to raise milk prices for first time in 30 years

December 11, 2007
By Ken Worsley


It’s not often that we get to write something on Japan’s dairy industry, so we’re glad for the chance. First, some context:

Back in November, Meiji, Japan’s largest milk producer, announced that it would cut its profit forecast for this year’s net income by 23 percent. On the same day, Morinaga, Japan’s second largest milk producer, announced an 11 percent decline in profit for the first half of the year. A few days later, Daiwa Institute downgraded its assessment of both firms’ shares to ‘underperform.’ The reason? Higher producer costs were seen as eating into profits. A day after the downgrading, Meiji shares fell by 6.4 percent, and Morinaga’s dropped 7.8 percent.

Today, both firms announced that they would be raising their prices for the first time since 1978. It may seem like a coincidence that both firms made such an announcement on the same day, but it’s not. Milk prices in Japan are set through annual negotiations between dairy firms and about 10 groups that represent milk producers. The agreement announced today will result in about a 3 percent rise in prices for both Meiji and Morinaga, to take effect from April. It was announced that the price hike is necessary due to increased packaging and energy costs.

Over the past ten years, retail milk prices have continually declined as demand has fallen. In other words, as those negotiators (correctly) took no action for the past three decades, the market has reacted naturally to the fall in demand by repricing the commodity at the retail end. This move, it seems, will remove the tie between supply and demand, and could possibly hurt sales - though 3 percent might be low enough to be absorbed by the consumer.

Reduced demand, higher prices. This is a trend we truly hope not to see take root.

Speaking of great timing: Just today, What Japan Thinks has published the results of a survey into milk consumption in Japan.

Filed Under Business, Economics, Japan, Supply & Demand 

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Comments

7 Responses to “Meiji, Morinaga to raise milk prices for first time in 30 years”

  1. Japanese and milk drinking: part 1 of 2 » 世論 What Japan Thinks on December 12th, 2007 1:02 am

    […] Also, the price of milk is due to increase for the first time in 30 years. […]

  2. Jeremy desu on December 12th, 2007 3:37 pm

    It is more expensive than gas. On top of that, what animals drink other animals milk? DON’T buy milk!

  3. John S on December 12th, 2007 5:15 pm

    Does this affect all dairy products or just milk? I like how they make an announcement and it sounds like some kind of emergency, but the price increase is about 5 months away. Do they know what producer costs will be like then? Beer prices going up, milk prices going up…what’s next?

  4. Aaron on December 12th, 2007 5:21 pm

    Haha……. Jeremy, you are so funny.
    Do you never drink milk before? To japanese, they get more benefits from the milk since 1950s. I guess drinking milk is one of the reasons that the japanese become higher than before. Compare with other developing asian countries, it’s more clear.

  5. Jeremy on December 12th, 2007 9:18 pm

    Aaron,

    You “guess” that is the reason and it is a guess. Are there any animals that drink other animals milk besides humans? It isn’t natural. I drink it but I’ll be stopping soon.

  6. Trans-Pacific Radio » Diet Session Extension, Pension Fiasco Failure, Fukuda on Fingerprinting, and Paying More for Milk: TPR News for Saturday, December 15, 2007 :: Independent Podcasts from Tokyo, Japan - Japanese News, Politics, Business and Econ on December 15th, 2007 11:27 pm

    […] though prices are rising, especially with regards to food items. On Tuesday, it was announced that Meiji and Morinaga, Japan’s two largest milk producers, would be raising their wholesale price… from this coming April. Both firms cited increased packaging costs at well as higher oil prices as […]

  7. Mleko - podrazitve - same, same but… « Salamala’s Weblog on January 9th, 2008 10:51 pm

    […] dogaja samo v dezeli podalpski, ravno ko sem prisel na Japonsko je tukaj tud odmevala skandalozna podrazitev mleka, namrec podrazili so ga prvic po 30tih letih!!!! Hihihiii kar pomeni, da bi jaz celo svoje […]

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