Chile

Transnational corporations sour the market

Producers to file complaints against Soprole,

Watt’s¹ and Nestlé for price fixing agreements.

The Osorno Milk Producers’ Association (Aproleche) reports that Nestlé and Watt’s have announced a reduction in the price paid per liter of milk, bringing it down by the same 15 Chilean pesos (0.024 dollars) as Soprole, a drop which would leave all dairy producers in the red.

In less than a year, dairy producers have had to absorb a total loss of 63 Chilean pesos (0.10 dollars) paid per liter of milk. This situation, they say, “is destroying us, because the costs were different and we can’t adapt so quickly to these drops. Nobody can produce with the prices they’re offering to pay. The explanation given by some industrial companies is that it’s possible that cheaper milk will be brought into the country; but this argument is absurd,” says Michel Junod, general manager of Aproleche.

The union leader says that to counter this situation Aproleche will go before the Antitrust Board to file a complaint against these three companies for “abuse of market power and price fixing agreement.” These charges are based on the fact that when on January 31 Soprole announced its fourth reduction in the price paid per liter of milk, Watt’s and Nestlé quickly followed suit. According to Junod, Watt’s “lowered the price the following week, and a few days later it was Nestlé’s turn. They both made the same reduction (15 Chilean pesos), which is why we are certain that they have an agreement.”

To the union leader, the companies’ decision to reduce the price they pay for milk leaves every single dairy producer in the red, which means they will have to “reduce production, a factor that is compounded with the shortage of feed due to the drought and the 20 percent drop in milk reception over the past few months, as compared to the same period of last year. This means less money to pay for overhead expenses and wages. Both employment and income will be affected,” he forecasts.

As we have informed in previous reports, it is highly likely that Soprole² and Nestlé will be merging this year, thus the degree of concentration of Chile’s dairy market will be even greater, and the power of the company resulting from the merger will be formidable.