Got Milk, Paying Dearly for It
Californians “got milk,” but they pay far more for it than most Americans. According to new A.C. Nielsen data from the first six months of 1998, Californians lay out an average of 65 cents more per gallon of 1% low-fat milk than residents of other states.
A survey by Consumers Union in late 1997 found even bigger differences: Because of advertised milk specials that are permitted in other states, the study found one major supermarket chain charging $2.77 less in Seattle for a gallon than it charged in San Francisco.
In recent months, a group called Mad About Milk has persuaded nine city councils in California to pass resolutions asking the Legislature to change laws it says are responsible for the high milk prices. The Los Angeles City Council recently passed such a resolution in a 12-0 vote.
The one law most in need of change prohibits retailers from selling milk below “cost.” Since “cost” is defined by arcane and subjective formulas based on retailers’ own estimates of their overhead, the law effectively lets supermarket chains set artificially high milk prices.
The law also stifles competition by prohibiting grocers from using milk as an advertised low-price special. It was enacted more than three decades ago to keep big chains from driving neighborhood markets out of business by selling milk below cost, but it has done roughly the opposite, inhibiting competition.
Some advocates for the poor have joined Mad About Milk to protest pricing that disproportionately hurts the poor, who spend relatively large portions of their incomes (as well as welfare payments) on some of the highest-priced milk in the country.
Groups like Consumers Union, however, have soured on Mad About Milk because they know the group is largely backed by Shamrock Food Co. of Arizona, a dairy company hungry for a share of the California market. And a lucrative market it is; annual milk and cream sales total $3.7 billion.
Shamrock’s self-interest is blatant. Last year a San Diego court fined the company more than $700,000 for selling milk in Riverside, Imperial and San Diego counties that did not meet California laws requiring higher levels of calcium and protein than federal law. Shamrock wants the state to change the laws so it can sell its milk, meeting federal standards, alongside milk fortified to California standards.
There is no clear evidence to support Mad About Milk’s contention that lower state requirements would mean lower milk prices. But there is also little evidence to support the California dairy industry’s contention that the milk solids added to boost calcium and protein greatly aid health. Reputable groups like the Center for Science in the Public Interest have concluded that adding solids to milk does not “add significantly to the nutritional quality of milk (for) . . . milk is an excellent source of calcium without added solids and Americans’ protein consumption already exceeds recommended levels.”
The state’s dairy industry and Department of Food and Agriculture have dismissed Mad About Milk as a “sham” group. But the state Legislature should not summarily dismiss the charges the group has helped bring to light. No matter who stands to benefit, the milk industry needs some reform.
The biggest sham, in the end, is the price Californians have to pay for milk.
