Second shot in milk war

Pack ‘n’ Save has fired the second shot in what could be a milk price war.

Federated Farmers says reports Pack ‘n’ Save in Auckland has joined Nosh in cutting the price of milk to $1 a litre shows  attention needs to focus on supermarket margins.

Dairy chair Willy Leferink said:

“Frankly, Nosh is doing more to open up competition at the retail end than any narrowly focused inquiry can ever achieve. 

“If Nosh’s milk was priced in Australian dollars and didn’t have the GST our milk attracts, it works out to be equivalent to A$0.68.

“Even Karori New World in Wellington is selling two litres of its budget milk for $2.99, as long as you spend $25 in-store.

“If you remove our GST and price that milk in Australian dollars, then it works out to be equivalent to A$1.01 per litre.  That’s only one Aussie cent more than what Coles is selling its milk for in Australia.  Milk Coles is spending a lot of money each week underwriting.

GST is a significant factor.

I’m not arguing for food to be excluded from the consumption tax but it does need to be taken into account when comparing food prices.

“But if you go to another New World in Wellington that same bottle will set you back $3.65.  That’s not only 22 percent more but tells me that margins at the retail end are pretty healthy

“That’s why we’d like to back Nosh Chief Executive Clinton Beuvink.  People need to support those local dairies and petrol stations that are selling cheap milk.  The big supermarkets rely on being convenient but convenient doesn’t make them the cheapest.

“Federated Farmers hopes this milk skirmish is the first step in a wider retail milk price war between Foodstuffs and Progressive.  It’s happened in the UK and Australia so why not here? 

“The focus really needs to be on the supermarkets because if dairies can sell milk cheaper and a small supermarket like Nosh can sell it as a loss leader, surely Foodstuffs and Progressive can do the same? 

“In two locations at least, Foodstuff franchisees already are,” Mr Leferink concluded.

Fonterra and farmers have been blamed for relatively high prices of milk and other dairy products but they are only part of a chain which adds costs at every link.

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