Selling and pricing practices in the direct sales of producer’s raw cow’s milk

Friday, August 26, 2016

Authors: András Jancsó, Gábor Császár, László Varga

 

 

1. Summary

Among our objectives were the presentation of the most well-known sales channels of raw milk, sales practices and also the technological level used, as well as the examination of the issues related to the pricing, critical points and challenges of the direct sales of raw cow’s milk. Our observations and samplings were performed at 21 direct sales locations of eight Budapest districts over 13 months, from June 2013 through June 2014.
Based on the results, it can be stated that, in the area studied, the sale of raw milk is realized through three main sales channels: markets (market halls), self-service systems (milk vending machines, refrigerated store containers) and different forms of mobile sales (tankers, regional home delivery system of producers). Further marketing practices can be distinguished within the different sales channels, where one can find the most primitive practice, the one without cooling, the traditional one and one that can be considered modern even when compared to Western European practice. The theoretical possibility to sell high quality raw milk was available for all sales channels, but the level of sales – especially from hygienic and technological viewpoints – ranged widely.
Based on changes in the sales price of raw milk, and its correlation with wholesale buying prices and pasteurized milk prices, it can be assumed that market prices and supply and demand are closely followed by shareholders of the market. Analyzing the mutually influencing effect of the prices of sellers located close to each other (e.g., in the same market), it could be concluded that the majority of them used a follower pricing strategy. Results of the price/quality ratio indicate a disordered state and arbitrary pricing.
The application of proper milk procurement, management and sales approaches would improve, in itself, processes that take place at the critical locations, described under the headings human factors, work organization, operation, maintenance and repair, quality aspects, packaging and labeling.

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