Nestle squeezes margins of Chinese dairy farmers

Edited and translated by People's Daily Online

Shuangcheng is known as the largest cattle raising city in Heilongjiang Province, and all of its daily fresh milk output, totaling 1,200 tons, is sold to Nestle Shuangcheng, Ltd., a subsidiary of Switzerland-based world-famous dairy producer Nestle. Local dairy farmers universally said that it has been a public secret that the well-known dairy producer has managed to squeeze the profit margins of dairy farmers, and its low-cost business model has caused discontent among local residents.

1-kilogram loss in milk weight

Lao Li, a dairy farmer from Shuangcheng Town of Shuangcheng City, used a scale to weigh two buckets of milk that he just extracted from his cows and got the reading of 91.3 kilograms in gross weight. The net weight of the milk stood at 74.3 kilograms after deducting 17 kilograms for the weight of the buckets. Reporters followed Li’s tricycle and arrived at a milk collection station established by Nestle Shuangcheng Ltd in Shuangcheng Town.

After Li had his sample milk checked according to the regulations of the milk station, Li threw the milk into an empty bucket at the station and then moved it onto an electronic scale. Li could not see the reading of the electronic scale because the screen faced the staffers. Then, a staffer swiped a card on a point-of-sale machine linked with the electronic scale and told Li that the weight of the milk was 73 kilograms.

Li quietly accepted the loss of 1.25 kilograms in milk weight. He said that he is already used to it. Many dairy farmers said that Nestle has shorted them on milk for several years, which has become an open secret.

Many local dairy farmers also said that Nestle has also lowered the milk purchase prices by reducing milk quality levels. Heilongjiang Province has stipulated that dairy producers should buy milk from dairy farmers at the prices set by government guidelines if the quality of fresh milk is above the national standard.

However, Nestle has divided fresh milk quality into four grades. For instance, Nestle said that the milk purchase price was 2.97 yuan per kilogram in the third quarter, but in fact only the first-grade milk can be sold at that price. If the milk is considered the fourth-grade milk, it will be priced below 2.7 yuan per kilogram. Furthermore, once the milk delivered by a dairy farmer is considered fourth-grade milk, the farmer will have to accept low milk prices over the following month.