Prior to lockdown there was a huge demand for hand sanitiser and some folk stockpiled sanitiser to protect themselves from coronavirus. This led to supply issues across the country and in turn a hefty price increase – per litre pricing has reportedly gone as high as $125 – $150 per litre!
We’ve all seen the news about businesses hiking up their prices but according to watchdog Consumer NZ, retailers who increase their prices during the lockdown won’t be breaking the law – unless they lie about their motivations.
Whilst it might look like a retailer is price gauging there are some valid reasons for the increase in prices.
Reason One: Ethanol Supply is Decreasing
In New Zealand, ethanol is a by-product of the dairy industry – it is produced during milk processing by fermenting lactose with a special yeast that converts this sugar into alcohol. The ethanol is then distilled off and further processed to remove water.
In winter most NZ dairy farms “dry off” and this year many dried off sooner due to drought conditions around the country. Fonterra Farm Source director Richard Allen estimates that about 13 percent of farmers have dried off by mid-April compared to 8 percent at the same time last season. This means less milk in production which in turns means less ethanol being made. Less Supply = Higher Prices
Reason Two: Locally made Raw Material Costs Increasing
Whilst there are many manufacturers making bottles, pumps etc in NZ, lockdown health and safety measures (e.g. less staff on site, reduced shifts etc) all mean less production. This coupled with a surge in demand has also pushed the price of raw materials up.
Reason Three: Imported Raw Material Costs Increasing
Most countries we import raw materials from have also experienced falling production due to lock-down measures. Whilst most of China is back up and running, reduced flights around the world mean freight costs to import goods have sky rocketed.
Now for the Good News
Gull recently announced they would be releasing enough ethanol (derived from sugarcane) from their stocks to make 950,000 half-litre hand sanitisers. This along with the ability to manufacture and import raw materials and the finished product faster as lockdown levels decrease means we should see prices stabilise soon.