Fonterra reveals its profit on 2 litre milk bottle

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As the Commerce Commission considers whether to hold a price control inquiry, Fonterra has revealed its profit margin on a two litre bottle of milk.

The dairy cooperative's chief executive Andrew Ferrier told Campbell Livelast night the company has a 12 per cent profit margin.

This means from a $4.80 bottle of milk, dairy farmers make $1.36, Fonterra gets 58 cents and 72 cents goes to the Government in GST, Campbell Live reported.

This would leave $2.14, but of the country's two main supermarket chains, Foodstuffs could not be contacted by Campbell Live and Progressive Enterprises would not reveal how much profit they make from milk sales, but said they make a profit margin of less than five per cent across all product lines.

The admission from Fonterra comes as concerns grow over the price of milk, as prices have climbed to the highest nominal level ever, at $3.68 for two litres in February

However figures released earlier this week showed in "real" terms milk actually cost more in 2002 and 1994.

Statistics NZ examined the retail price of milk from the 1890s, when a quart cost just over three pence, to this February when the average price hit $3.68 for two litres (based on the cheapest available brand).

Full deregulation in 1993 meant milk could be sold at any price and in January 1994 the average price for a 2- litre container was $2.37 - equivalent to $3.78 today.

Home delivery milk dwindled during the 1990s, the article said, and following a high point for export prices the retail price in January 2002 hit $3.20 - equivalent to $4.18 today.

Consumer NZ chief executive Sue Chetwin said people paid too much for milk and deserved to know how prices were set.

The Commerce Commission last month said a number of parties had laid complaints about the retail price of milk and it was undertaking preliminary analysis to determine whether a price control inquiry was warranted.

Mr Ferrier told Campbell Live his company would co-operate with the inquiry if it went ahead.

"We will give the Commerce Commission our entire milk price manual," he says. "As soon as they explain what they want we need to know what they are getting at in this one."

- NZ Herald staff