Cyprus Mail

Why do we pay so much for milk?

Members of the public are paying dearly for the monopolies which dominate the milk and bread industries it emerged this week, as MPs discussed high prices in Cyprus compared to other EU countries.

For starters, the supply of milk is controlled by the Cattle Farmers Association (POA) which is responsible for distributing the raw product to the production companies, chairwoman of the Cyprus consumers association Frydia Michael told the Sunday Mail.

“Cattle farmers claim they have high expenses, however, some costs have gone down, particularly in the past two or three years in terms of electricity and fuel. This has not been reflected in the price.”

This is part of a chain reaction where the cost carries on to the production line and then to retailers, eventually reaching the public, she explained.

“Everyone needs to make a profit, we’re aware of that and we’re not against it. But this is grossly overdone.”

Between 2012 and 2014, the price of milk in Cyprus went up by nine per cent. In the EU, milk prices dropped 26 per cent in the 2014 to 2016 period.

Price of milk went up nine per cent between 2012 and 2014

POA however feels it is unfairly targeted.

“In the past 20 years, we have increased the price by 23.8 per cent per litre. The price for consumers however has gone up by 80 cents per litre,” the association’s general manager Nicos Papakyriakou said, accusing retailers of being the major profiteers.

Additionally, the government has also slashed their funding, he told the Sunday Mail.

Reasons for their higher costs include the fact that nutrition for the cows, such as wheat, is imported while fields used for grazing are dependent on the weather.

“There’s been no rain now, so we have to import more food for them,” Papakyriakou said.

POA’s manager went on to counter comments by the consumer association that POA is the sole supplier of milk to the industry.

“We have 65 per cent of the market. The remaining 35 per cent is comprised of independent producers,” he said.

“It is an open market. Anyone can milk cows and compete,” Papakyriakou said.

Although the market may be open, it is a very small one said Sofronis Clerides, associate professor of economics at the University of Cyprus.

Further down the production line, more monopolies rule the market, he added.

“Competition is limited, there are two major manufacturers and a few other very small ones,” which pasteurise the milk and turn it into the finished product.

Although the Commission for the Protection of Competition (EPA) is supposed to regulate the market, in practice it is “useless” Michael said.

It has investigated POA several times for violating the law, the latest being a €2.1m fine imposed in December 2014 for price fixing and other irregularities but to no avail.

Not only has the fine not been paid, but such decisions are usually appealed, Clerides said, and in this case may be entirely dropped after one EPA member resigned last month following a ruling that deemed his appointment illegal as he was also a member of DIKO’s central committee.

EPA could not provide the Sunday Mail with the number of cases they are investigating.

Speaking about the ongoing case, Papakyriacou said they have appealed the fine on a Supreme Court level and believe they will win the case.

“The reason is, in 2010, EPA investigated the whole chain of production and ruled we do not make much profit. In 2012 however it began a new investigation and focused solely on us, ignoring the manufacturers and retailers.”

Nevertheless, according to Clerides, competition is a crucial factor in the prices consumers are paying. “EU has larger markets and therefore more competition.”

In terms of milk, imports are particularly difficult as there is not much demand for long life milk.

Fresh milk – to compete with local brands – is for practical reasons difficult to import from other countries.

“Other countries consume long life milk and there is a greater possibility of competition. It is not used much in Cyprus so buyers cannot pressure fresh milk manufacturers,” Clerides said.

Consumers however do seem to be turning increasingly towards the cheaper long-life milk.

“I remember no one would ever touch that milk. Now I see people buying it in crates,” one supermarket employee said.

When it comes to bread prices, the situation is more complex, Michael said, because there is no standard item which can be compared across the market.

Although consumers may find much of the same items in various bakeries – sliced bread, village bread, etc – because some of the ingredients may differ, they cannot be classed into one category, making comparisons more complex.

Buns however, are ridiculously overpriced she said.

“Someone that has to make a sandwich for kids to take to school will pay way too much for the bread alone,” she said.

Additionally, flour and other raw materials necessary for making bread is also imported further adding to the cost, Clerides said.

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