A hawker sells milk in Nairobi. New KCC says it has asked supermarkets to reduce the prices of its milk by about Sh5 for a half-litre packet in the next two to three days. Photo/File
Milk is likely to become more affordable after New KCC said it had reduced its prices and advised retail outlets to pass on the benefit to consumers.
New KCC said its milk prices should fall by up to Sh5 for a half-litre packet, possibly starting this weekend. However, retail outlets have sometimes declined to pass on such benefits to consumers, citing pressure from other costs.
“We have reduced consumer prices by Sh5 per half litre to Sh40. We have given notice to the supermarkets and we expect them to effect the changes within two or three days,” said New KCC chairman Matu Wamae.
A check at leading stores within the Nairobi Central Business District, however, revealed the New KCC products were still selling at the prices that prevailed after the shortage caused by a dry spell.
New KCC’s main rival, Brookside, signalled it would review its prices while Githunguri Dairy — the third largest firm by market share — has already reduced prices.
“We will be forced to react because of an ongoing marketing strategy. This will be in a very short period,” said John Gethi, Brookside’s general manager for milk procurement.
A spot check showed that Fresha, the Githunguri Dairy’s flagship brand, cost Sh38 for the pouch and Sh40 for a half litre packet. Most fresh milk brands have been selling at between Sh45 and Sh48 for the half litre packet.
“We have today (Thursday) received communication to adjust prices from two processors and have acted accordingly but it is not from any of the two major firms,” said Frank Kamau, the general manager at Tuskys Supermarkets.
At Tusky’s Muindi Mbingu branch, Brookside’s half-litre Tuzo and fresh milk were retailing at Sh48 as did New KCC’s Gold Crown brand. Daima fresh was the second most expensive costing Sh1 a half a litre less.
Other brands Molo, Tuzo, Ilara and Limuru fresh were each selling at Sh45. Smaller retailers were selling the milk at between Sh50 and Sh60.
“We expect prices to start dropping following two months of regeneration of fodder,” said Machira Gichohi, the managing director of the Kenya Dairy Board, which regulates the sector.
Milk prices shot up from Sh33 per half litre packet in February after farmers stopped delivering the commodity citing poor pay. They resorted to selling milk directly to consumers where the earnings are higher and payments prompt.
“Intake by processors dropped by 45 per cent during the dry season between January and March,” said Mr Gichohi.
Dairy farmers have been complaining over the Sh28 paid per litre of milk to them by milk processors, with co-operatives saying that after deduction of operating costs, only Sh24 reaches the farmer.
With the cost of producing a litre of milk estimated at Sh35, up from Sh25 one year ago, this leaves dairying as an unprofitable business.
Mr Gichohi, however, said producer prices would be left to market forces.
Last week, Brookside invited producers to sign up delivery contracts at improved prices of Sh40 per litre.
“We welcome all suppliers but they must sign a contract for six months for a fixed price of Sh40 a litre. The contract is renewable,” Mr Gethi said.
New KCC pays farmers between Sh30 and Sh35 per litre depending on quality. Chilled milk, which is said to be of superior quality, attracts premium prices.
New KCC and Brookside are operating below capacity, meaning farm production levels are yet to peak.
New KCC has an intake of 300,000 litres per day against a capacity of 550,000 litres per day while Brookside is processing 455,000 litres per day against a capacity of 650,000 litres.
Shortage of raw milk
“There is a huge (raw) milk shortage. No processor is at 100 per cent capacity,” said Mr Gethi.
An acute shortage of raw milk forced processors to shift from production for export to fresh milk for domestic consumers at a time when demand for long life milk is growing in the international market.
