* Dairy cooperative's milk vending machines cut prices for
* Greece has fourth-highest milk prices in EU
* Milk prices rose during deflation, six-year recession
By Lefteris Papadimas and Deepa Babington
LARISSA, Greece, Aug 5 Grassroots movements to
cut out middlemen have been on the increase since Greece's debt
crisis exposed the country's Achilles heel - a bureaucratic
system which stifles innovation and encourages corruption.
One of the most successful is based in Larissa, near the
demi-God's legendary birthplace. The town's new vending
machines, have, on a small scale, solved a problem Greece's
leaders and their international backers have tried and failed to
They dispense not snacks or soda, but milk, supporting
farmers while undercutting prices that have defied economic
logic to remain some of the highest in the European Union.
Greeks, whose average incomes fell by 30 percent since the
crisis hit in late 2009, have been flooding in - bringing their
own bottles or buying plastic or glass ones from the machines.
"People were waiting 20 to 30 minutes in line, to buy milk!"
said Constantine Gougoulias, 37, general manager of the dairy
cooperative behind the initiative, describing the response on
the day the machines were set up. "We were telling them, 'Hold
on, we need to fill the machines first'."
Today ThesGala or "Want Milk?" has expanded to 14 vending
machine outlets in Larissa and plans to double the network in
and around the central city over the next year.
Sales from the blue and white machines account for a small
fraction of the cooperative's milk output, but they show how
crisis has encouraged entrepreneurship where self-interest has a
social twist in a country where bureaucracy stifles development.
Most of those efforts have been informal, relying on word of
mouth and loosely organised at the outskirts of towns and
In 2012, for example, potato farmers began selling their
produce directly to consumers at parking lots outside towns in
northern Greece to cut out the supermarkets who they accused of
hurting both producers and consumers.
Since then, the movements have expanded beyond potatoes - in
Kozani in the north and the central town of Volos, for example,
people have formed groups selling anything from flour to
"We have seen an increase in social solidarity and
cooperation in Greece - we didn't have this before," said Fiori
Zafeiropoulou, a lecturer in social entrepreneurship at Athens'
City Unity College.
"This is the positive element of the financial crisis."
The supermarkets have denied accusations they are
exploitative middlemen, saying the crisis has hit them too.
Greek dairy firm Olympos, which buys milk in bulk from small
producers, says it is not threatened by movements like ThesGala
and welcome initiatives like the milk vending machines.
It dismisses criticism that companies like it are to blame
for high milk prices, saying Greece's high transport costs and
regulation make it impossible to compare to other EU nations.
The European Union and International Monetary Fund bailing
out Greece have long pressed Athens to cut out restrictive
licensing procedures and excessive regulation, which they blame
for driving up prices in Greece and choking the economy.
Milk was among the industries that the EU and IMF have cited
as in need of liberalisation. But it has also proven to be a
sector stubbornly resistant to change - indeed, milk prices have
risen more than 12 percent in four years even as the deepest
post-war recession drove prices down over the past 16 months.
Among the reasons, economists say, are high mark-ups by
retailers and high transport and distribution costs in a nation
of mountains and islands, all factors that leave farmers with
According to a report released by the Organization for
Economic Cooperation and Development last year, the difference
between retail and producer prices for milk in Greece is 35
percent higher than the EU average.
The OECD also blamed milk labeling restrictions aimed at
protecting Greek farmers. Whereas EU rules leave the shelf life
of pasteurised milk to the discretion of producers across the
bloc, Greece until recently "fresh", pasteurised milk could have
a maximum shelf life of five days.
The OECD's recommendations, urged upon Greece by its
international lenders, argued that the five-day rule should be
scrapped since it made cheaper imports next to impossible and
raised production costs, because lots of milk went unsold,
returned by supermarkets to the producers.
In response, Prime Minister Antonis Samaras's ruling
coalition this year tried to liberalise the milk market by
lengthening the "fresh milk" period to 11 days. The reform was
met with protests from farmers fearing a wave of cheap imports
and prompted a deputy agriculture minister to quit.
Forced to row back, the government instead introduced two
new milk categories - one with a shelf life of two days and
another with seven days and scrapped the "fresh" milk label.
But the two-day extension has so far done little to boost
imports, and retail prices have yet to come down.
"So what was the result? The prices did not fall, not even
by a cent," Maximos Harakopoulos, the former deputy agriculture
minister who quit in protest at the reform told the Eleftheros
Typos daily last month, calling the episode a "fiasco".
A EURO A DAY
ThesGala, on the other hand, is counting its successes. The
cooperative's 130 tonnes of daily milk production accounts for
only about 10 percent of milk produced in Greece, and only seven
percent of it is sold from machines, but members of the
cooperative expect that to grow fast.
Even if the group's primary objective was to ensure stable
prices for producers, it also "wanted to prove that quality milk
can be sold cheaply in Greece," said the cooperative's
president, Thanassis Vakalis, 40, asserting they had outdone the
European Commission, European Central Bank and International
Monetary Fund "troika" supervising Greek reforms.
"It appears that we succeeded where the troika and the
government failed even though we are just a few people," he
ThesGala's success is a boost to small dairy farmers like
Andreas Karafyllis, a former software developer who returned
home from Germany in 2006 to start a farm. He nearly went out of
business in 2009 when the prices paid to producers fell at least
six cents a litre below the cost of production.
Karafyllis says retailers were squeezing out consumers with
high prices and producers with low prices.
"The blame isn't with producers - it's on everyone above
them," he said one afternoon as he walked through his farm near
Larissa as cows munched on hay near oleander blooms.
ThesGala pays farmers 45 cents a litre, giving Karfyllis a
more stable and lucrative income from his 120 cows and 80 small
calves. Unlike other ad-hoc farm movements, the cooperative
publishes yearly financial statements and is taxed beforehand on
milk delivered, meaning it does not contribute to Greece's
vibrant black market economy.
On a recent summer evening, a steady stream of people - from
young couples to fathers with toddlers in tow - drove up to a
milk machine near the town centre and stuck glass bottles under
a spout that poured down frothy milk for 90 cents per litre. The
average price of milk stands at 1.28 euros per litre in Greece.
"It's the best quality and I save a euro a day," said
Ioannis Pavlidis, 40, a school bus driver who buys two litres a
day for his two daughters. "The effort is commendable."
(Writing by Deepa Babington; editing by Alessandra Galloni and