Consumers to pay more for milk and bread as prices rise
Supermarkets in Nairobi city centre — which are relatively cheaper than shops in suburbs — have raised the retail prices of a half-litre packet of KCC Fresh milk, Ilara and Fresha to between Sh32 and Sh36 – an increase of up to three shillings. File
Consumers will have to dig deeper into their pockets to pay for yet another jump in the cost of breakfast attributed to a fall in the supply of milk and an increase in wheat prices.
Leading processors of fresh milk and bread manufacturers have increased the prices of their products by up to 10 per cent, raising the breakfast budgets for a majority of Kenyans who rely on tea and bread for their first meal of the day.
Supermarkets in Nairobi city centre — which are relatively cheaper than shops in suburbs — have raised the retail prices of a half-litre packet of KCC Fresh milk, Ilara and Fresha to between Sh32 and Sh36 – an increase of up to three shillings.
“The onset of the dry season has caused supply and demand constraints forcing us to increase payments to farmers from Sh26 per litre last year by two shillings,” said Kipkirui Lang’at, the New KCC managing director.
“It is this cost that is now being passed on to the consumer since other operating costs prevent us from absorbing it ourselves,” he added.
New KCC, like other processors, had in September last year increased their prices by another three shillings, taking milk prices to the highest level since 2009.
Brookside, which is the second largest milk processor in the country, has also increased the prices of their Tuzo and Ilara half-litre brands by six per cent to Sh35.
Brookside marketing manager John Gethi said the firm had entered into six-months long supply contracts with farmers to safeguard their supplies.
“The effect of a weakened shilling experienced towards the close of the year combined with that of the high cost of fuel used to power machines resulted in higher cost of operations,” said Mr Gethi.
Towards the end of September last year, the shilling took to a weakening run against the dollar, hitting a low of 107 to the greenback in October. Following the intervention of the Central Bank of Kenya (CBK), it has now improved to the mid eighties range.
In the past two fuel price reviews the Energy Regulatory Commission has cut the cost of diesel – the fuel used to power factory equipment — by Sh7.
Brookside says that the benefits of these fuel reductions will be felt in coming months, as they were still “adjusting to prevailing industry conditions.”
On the other hand, a coinciding 10 per cent increase in prices of bread prices has heaped pressure on the cost of the average Kenyan’s breakfast.
Broadway’s is retailing their 400 gram bread at Sh41 up from Sh37 four months ago.
At the beginning of last year, however, the same bread used to cost two shillings less.
Other brands such as the Sh1.5 kilogram Festive bread - produced by DPL Festive – will now cost Sh147, a 5 per cent to the current price. Also, a 600g packet of Elliot will now cost you Sh61 up from Sh57in September.
Benefits eroded
These bread manufacturers are citing the wheat flour costs as the main reason for the increases.
“We bought our latest stock in early December when the dollar was still around the Sh90 mark and this higher cost is what is being passed on to the consumer until the currency stabilises,” said Bimal Shah, the Broadway’s managing director.
Mr Bimal added that whereas the international prices of wheat have been declining over the past two years, the weakened foreign exchange in the last quarter of 2011 eroded these benefits.
Data from Indexmundi shows that the cost of a tonne of wheat is now $269.03 (Sh23,136), representing a 15 per cent drop from the time the last revisions were made.
Kenblest Bakeries managing director, Neel Shah, said if the dollar claws back value over the next months, and further reductions in fuel prices happen, bread prices are bound to fall.
