State official suggests milk overpriced by LV markets

Friday, Sept. 1, 2000 | 11:21 a.m.

The Nevada Dairy Commission says milk appears to be overpriced at Las Vegas supermarkets.

While producer milk prices have fallen from record highs last October and production costs are lower than they have been in years, the retail price of whole milk has stayed about the same -- about $3 a gallon in Las Vegas.

That prompted Stacy Jennings, executive director of the Nevada Dairy Commission, to issue a statement laying the blame on supermarkets. The Dairy Commission does not regulate the retail price of milk, but enforces state laws setting minimum prices to protect dairy farmers and prevent big dairies from oversupplying the market.

Milk costs 80 cents a gallon more in Las Vegas than it does in Reno, Jennings said. Commission statistics show the average price has hovered at $3 a gallon 11 out of the last 12 months. Meanwhile, wholesale prices fell more than $12 per hundredweight from about $19 per hundredweight.

A hundredweight is the standard volume measure used by the dairy industry and is 100 pounds of fluid milk -- a little over 11.5 gallons.

Jennings said her purpose in issuing the statement is to spur consumers to question stores about their milk prices. She said the supermarkets aren't doing anything illegal -- but she feels consumers should receive the benefits of lower wholesale prices, especially when they feel the pinch of higher costs when wholesale prices go up.

"I don't believe there is any price-fixing going on in Nevada," Jennings said. "But consumers can make a difference by raising questions to the stores because I know the price of milk could go down. There's room for prices to move so that the stores can make money and consumers can benefit at the same time."

Jennings said her office conducts monthly surveys and found that the average price of whole milk has stayed consistently high at each of the four major supermarket chains serving Las Vegas. The chains usually offer a nonlabel brand that costs the least per gallon, a store brand that is close to the average and a Las Vegas dairy brand -- Anderson Dairy -- that runs the highest.

The stores normally price Anderson above their own brands to make the store brands more competitive, even though Anderson production prices are about the same or less.

Jennings said in the first week of August, Smith's Food & Drug Stores, owned by Kroger Co., offered whole milk in a range of $2.80 to $3.59 a gallon. Albertson's and Vons offered it for between $2.89 and $3.59 a gallon. Raley's sold it for between $2.89 and $3.55 a gallon.

Meanwhile, a gallon of whole milk cost $2.21 a gallon at Costco and Sam's Club, two discount outlets with stores in Las Vegas.

"I'm just saying that if Costco can sell it for two-and-a-quarter and make a profit, why can't the other stores do it?" Jennings asked.

She believes that if consumer pressure can break the bottleneck at one store, the others may follow in order to compete, since supermarkets routinely survey their rivals' prices.

Meanwhile, a spokesman for California-based Vons, a unit of Safeway Inc., which opened its 21st Las Vegas-area store on South Rampart Road earlier this month, said the Dairy Commission's comparison of prices is flawed.

Kevin Herglotz of Vons said it's unfair to only compare the prices on whole milk since consumers also buy nonfat, 1 percent and 2 percent milkfat products as well.

Herglotz also noted that his company consistently offers discount pricing when a customer buys two gallons of milk at a time.

"Most families that purchase milk buy the two-packs," Herglotz said. "When you buy it that way, it costs $4.59, or a little over $2.29 a gallon. You can get nonfat milk in a two-pack for $2.20 a gallon."

Herglotz also questioned a Dairy Commission statement on milk prices from other cities. The statement said Las Vegas had the third-highest price per gallon on whole milk in May, $3.06, among 11 cities.

"I don't know where they got some of those prices, but I know a gallon of milk didn't cost $2.67 in Los Angeles," he said.

Jennings said the data on the Los Angeles price came from the International Association of Milk Control Agencies, a group of 21 state dairy regulators.

A spokeswoman for Raley's Supermarkets & Drug Centers, which has 18 stores in the Las Vegas area, said her company generally follows the pack when it comes to dairy product pricing.

"We are known in the industry as following our competitors," said Carolyn White of the West Sacramento, Calif.-based company. "Some people are known as the ones who set the prices, others are the ones who react against those prices. We follow our competitors and usually we come in right at the average."

She said the company particularly takes that approach on dairy products because the prices fluctuate so much.

Representatives of Albertson's, Boise, Idaho, and Smith's, the other dominant supermarkets in Las Vegas, could not be reached for comment.

Meanwhile, grocery stores operated by sister companies of Vons and Albertson's have been accused of price-gouging on dairy products in a lawsuit filed in Cook County Circuit Court in Chicago.

In a suit filed last week, 12 milk drinkers and their families say Jewel Food Stores Inc. and Dominick's Supermarkets conspired to raise milk prices by 60 cents a gallon last year while the wholesale price of milk fell by 18 cents a gallon since January.

Representatives of Dominick's, which like Vons is owned by Safeway, and Jewel-Osco, which is owned by Albertson's, said in statements that the allegations are false.