Supermarket Milk Price Cuts Spark Fears of Renewed ‘Milk War’
Source: DairyNews.today
In a move reminiscent of the 2011 price slashing that launched Australia’s “milk war,” major supermarket chains Coles, Woolworths, and Aldi have collectively reduced the price of their store-brand milk for the first time in over a decade. Last month, Coles and Woolworths lowered the price of their generic one-litre milk by 5 cents, down to $1.55 per litre, while Aldi followed suit by matching the price this October, having previously maintained it at $1.60.
The price reduction has raised concerns among dairy farmers about a potential new wave of price wars that could further strain their already tight margins. Dairy Farmers Victoria President, Mark Billing, who operates a 400-head dairy farm in Larpent, southwest Victoria, expressed his apprehension about the supermarkets’ actions. “This approach devalues our product and could drive many of us to financial ruin,” Billing remarked.
Both Coles and Woolworths have insisted that they are passing on savings from milk processors to customers rather than cutting the farmgate milk prices they pay directly to farmers. A Woolworths spokesperson explained, “Changes in the farmgate milk price flow directly into the price we pay processors for their finished product — when it goes down, we pay less, and we’re passing those savings to consumers.” Coles reinforced this sentiment, emphasizing that their direct sourcing model, introduced in 2019, ensures competitive and guaranteed prices for farmers.
However, this price drop has triggered alarm within the dairy farming community, with concerns that the supermarkets are once again treating milk as a “discount leader” — a heavily discounted product used to lure shoppers into stores. While a one-litre milk container now costs 5 cents less, other sizes have also seen reductions, with two-litre bottles dropping from $3.10 to $3.00 and three-litre bottles decreasing from $4.50 to $4.35.
Australian Dairy Farmers, the industry’s peak representative body, voiced apprehensions about the potential long-term impacts on farmers who are already battling tight margins and a challenging production environment. Mark Billing described the price cuts as “extremely frustrating” amidst already constrained margins, stressing that such moves add pressure to farm management and sustainability.
The price reductions come amid broader scrutiny of supermarket pricing practices. The Australian Competition and Consumer Commission (ACCC) recently initiated legal action against Coles and Woolworths, accusing the retailers of misleading consumers with false discount pricing claims across hundreds of products. A recent ACCC report indicated widespread consumer distrust regarding supermarket “sale price” claims, casting further doubt on the timing and motives behind these milk price cuts.
As supermarkets continue to tout their commitment to “passing on savings” to customers, many farmers see this trend as part of a broader pattern of pricing instability that has characterized the dairy market since the $1-per-litre milk war first began over a decade ago. Dairy production in Australia is currently at its lowest level in 30 years, and imported dairy products are on the rise, adding another layer of complexity to the industry’s struggle.
Reflecting on the uncertainty and hardship that these pricing dynamics bring, Billing said, “Farmers are resilient, but even a piece of wire can only bend so much before it breaks. It can be soul-destroying to see the value of our product continually diminished.”
With the number of Victorian dairy farms dwindling from over 7,400 at the turn of the century to fewer than 2,800 today, the industry is facing a critical juncture. Last year, eight percent of Victorian dairy farmers exited the sector altogether, a stark indication of the mounting pressure on those who remain.
As Australia’s dairy farmers brace for what could be the resurgence of another milk price war, many are left questioning whether these supermarket pricing strategies will lead to further reductions in the industry’s viability and sustainability.
Both Coles and Woolworths have insisted that they are passing on savings from milk processors to customers rather than cutting the farmgate milk prices they pay directly to farmers. A Woolworths spokesperson explained, “Changes in the farmgate milk price flow directly into the price we pay processors for their finished product — when it goes down, we pay less, and we’re passing those savings to consumers.” Coles reinforced this sentiment, emphasizing that their direct sourcing model, introduced in 2019, ensures competitive and guaranteed prices for farmers.
However, this price drop has triggered alarm within the dairy farming community, with concerns that the supermarkets are once again treating milk as a “discount leader” — a heavily discounted product used to lure shoppers into stores. While a one-litre milk container now costs 5 cents less, other sizes have also seen reductions, with two-litre bottles dropping from $3.10 to $3.00 and three-litre bottles decreasing from $4.50 to $4.35.
Australian Dairy Farmers, the industry’s peak representative body, voiced apprehensions about the potential long-term impacts on farmers who are already battling tight margins and a challenging production environment. Mark Billing described the price cuts as “extremely frustrating” amidst already constrained margins, stressing that such moves add pressure to farm management and sustainability.
The price reductions come amid broader scrutiny of supermarket pricing practices. The Australian Competition and Consumer Commission (ACCC) recently initiated legal action against Coles and Woolworths, accusing the retailers of misleading consumers with false discount pricing claims across hundreds of products. A recent ACCC report indicated widespread consumer distrust regarding supermarket “sale price” claims, casting further doubt on the timing and motives behind these milk price cuts.
As supermarkets continue to tout their commitment to “passing on savings” to customers, many farmers see this trend as part of a broader pattern of pricing instability that has characterized the dairy market since the $1-per-litre milk war first began over a decade ago. Dairy production in Australia is currently at its lowest level in 30 years, and imported dairy products are on the rise, adding another layer of complexity to the industry’s struggle.
Reflecting on the uncertainty and hardship that these pricing dynamics bring, Billing said, “Farmers are resilient, but even a piece of wire can only bend so much before it breaks. It can be soul-destroying to see the value of our product continually diminished.”
With the number of Victorian dairy farms dwindling from over 7,400 at the turn of the century to fewer than 2,800 today, the industry is facing a critical juncture. Last year, eight percent of Victorian dairy farmers exited the sector altogether, a stark indication of the mounting pressure on those who remain.
As Australia’s dairy farmers brace for what could be the resurgence of another milk price war, many are left questioning whether these supermarket pricing strategies will lead to further reductions in the industry’s viability and sustainability.
