Fonterra defends milk prices

Fonterra Brands says New Zealand prices are internationally competitive and the perception of an inflated cost is wrong. File photo / NZ Herald

Milk prices are reasonable and people can get a bargain if they "shop around", Dairy giant Fonterra says.

At a parliamentary milk price inquiry this morning, Fonterra Brands managing director Peter McClure said New Zealand prices were internationally competitive and the perception of an inflated cost was off.

"If you shop around in New Zealand you have real power that is available as cheaply as almost anywhere in the world," he told the committee.

The company defended its process for setting raw milk prices, calling it "transparent and robust".

Green MP Sue Kedgley said the current auditing process was paid for by the company, and asked if there was an objection to using an independent auditor.

Fonterra chief financial officer Jonathan Mason said the company's preference was to have transparent disclosure and defended the current system.

"It's a qualified auditor with good firepower, intelligent people, doesn't chew up an enormous amount of time, we have four auditors ... add on a fifth wouldn't be defining for us, but we prefer the disclosure that we put out there."

Speaking to media later, Mr McClure said Fonterra had faced a lot of heat on the issue of milk prices.

"There's a perception that because we're large we're somehow gaming things to charge higher prices," he said.

"But the reality is that milk prices in New Zealand today, in real terms, are cheaper than they were in 1999."

However, Consumer New Zealand chief executive Sue Chetwin, who also appeared before the inquiry today, disagreed that milk was affordable.

"In the last five years, retail dairy prices increased by 50 per cent ... so I think we can say that dairy prices are high," she said.

"We accept that Fonterra was set up to be a dominant player, but under the Act there were meant to be protections for consumers and we don't believe there's any evidence, or there's been little evidence, that regulation has achieved the desired outcome.

"It's not that easy for some people once they actually get to the supermarket to see that milk's very expensive and then decide to shop around, especially in the budget end of the market."

Ms Chetwin noted her preference for an independent auditor to look at price setting, and also called for more openness from retailers about their milk price margins.

The inquiry, being conducted by Parliament's commerce select committee, was launched after the Commerce Commission last month decided not to investigate the matter.

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