Milk prices at store have fallen, likely to stabilize for rest of the year

Dairy products in a store in Estonia.
Dairy products in a store in Estonia. Source: Priit Mürk/ERR

Milk has dropped in price to €0.59 per liter in several store chains in Estonia, while the price of milk and other dairy products is not expected to rise again this year.

However, some industry commentators point to a certain cynicism in one-off price offers on specific milk products which may mask the true picture with prices.

Milk prices at source reached record-breaking levels late last year, and this was also reflected on the store shelves, but as of now, the situation has changed.

At the end of July, supermarket chain Rimi cut the prices of some of its dairy products by up to 40 percent. 

Rimi Estonia's purchasing manager, Talis Raak, told ERR that dairy products make up a very large component of customers' daily purchases.

She said: "For example, the price of carton milk, which used to be €0.75 a liter, can be found on our shelves today for €0.59," adding that Rimi plans to further expand its range of budget dairy products.

Maxima, another supermarket chain, also announced a reduction in the prices of dairy products this week, by up to 40 percent, until the end of October, with the most commonly-bought products.

For instance, a two-liter full-cream milk carton from producer Farmi now costs €1.79, down from €2.39.

Oliver Rist, purchasing director at supermarket Coop Eesti, whose outlets can often be found in smaller towns and in more rural areas, noted that each supermarket chain puts up its own discount prices, rejecting claims of an unprecedented price fall.

What has been going on is simply product differentiation, he said.

In fact, "When taking into account all the announcements of price cuts we have had over the past few months, which pledge goods even cheaper than before, food should practically already be available for free in the stores," he said, somewhat tongue-in-cheek.

Rist suggested examining these campaigns in more detail. He pointed out that in Coop, two liters of Farmi whole milk costs €1.89 when using a customer loyalty card, whereas Maxima lists this product as being reduced from a regular price of €2.39 in its campaign, he said.

"If this is really the case, then they are not in fact offering customers a discounted price, but have lowered the unusually high price to a fairer level. In the case of other products, it is also worth monitoring the whole product range, instead of honing in one specific product," Rist went on.

Kristi Lomp, head of Estonian supermarket Selver, said that her company does not play around with separate prices, and changes are made in cooperation with price information as received from the manufacturers.

Lomp said: "At present, there doesn't seem to have been a massive drop in food prices."

"Selver has had offers at consistently favorable prices for many years now. We select the most popular food and also manufactured goods within these several hundred offers, including for dairy products."

In addition to dairy products, according to the Coop spokesperson, the price of oils, coffee and fish has fallen the most, while the Rimi spokesperson highlighted out pasta, red fish and also cooking oil as product categories that have become cheaper as a whole

Nordic Milk chief: A pack of butter for under a euro is a surprise

Manager at Nordic Milk Ülo Kivine told ERR the price of milk is forecast to stabilize, and should not rise again this year.

Nordic Milk produces the Tere and Farmi brands.

While there is a lot of competition between retail chains, who shape the final prices themselves, Kivine told ERR, in general, the price of raw materials has also gone down.

"In Estonia, prices paid for raw milk are in the range of €330-450, so these differences are quite big," Kivine said.

Nordic they pay farmers a price for milk which is related to the EU average, ie. much more than Estonian cooperative industries do, Kivine added.

"I already stated in the spring that a sharp drop is not foreseen in the near future; rather the fall in price would be gradual, and that has materialized. Today, we can say that prices are no longer falling at such a pace, and they have instead reached stability. Not only in the case of milk, but in the case of commodities in general, " Kivine went on. "Prices have come down and consumers have noticed."

There are no signs that the price will go up again in the near future, either from the side of raw materials or sales prices, Kivine added.

The wholesale price of drinking milk was 13 percent lower this July compared with the level last year, while the sale price of dairy products has fallen by about the same proportion.

While there has been a lot of talk in Estonia about the dry and cold spring, which had a very bad effect on crop growers, according to Kivine, a perspective of several years must be taken into account: Last year saw a very good harvest, and this year's result is actually average over a five-year perspective. 

In the case of milk production, this July a 10-year volume record was set, so from this point of view, it cannot be stated that milk production has been hit in any way by conditions.

The price of butter is practically at parity with world market prices, Kivine added, and it has fallen by 40-50 percent on year.

While Estonian stores also sell butter from Lithuania and Poland, whose wholesale price is below a euro per pack, according to Kviine, the price of Estonian butter prices cannot fall to that extent.

It may be the case that a degree of loss-leading is going on with some commodities in store, looking at some of the prices, Kivine added.

"Looking at commodity prices, they also sometimes make us wonder how it is possible to sell at such a price. It is likely that the retail chain's own margins are non-existent, or the retail chain supports reaching such a price on the market by leaning on its own resources," Kivine said.

Nonetheless, with heating season coming and the same fears over energy prices and security of supply remaining as they had been over the previous two winters, this will also exert a bearing on prices to come.


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Editor: Andrew Whyte

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