Second shot in milk war

08/02/2012

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.


First shot in milk war?

07/02/2012

Competition between retailers in Australia have driven down the retail price of milk.

That could be about to happen here:

Grocery retailer Nosh Food Market looks set to trigger a price war on milk by cutting the price of a brand of two litre mitre by more than half to $2.

Nosh says milk prices have risen 41% since 2007 and milk now costs relatively more in New Zealand than in Australia, South Africa, Britain and United States.

Co-founder Clinton Beuvink says he hopes the move will be a catalyst for permanently driving down the price of milk.

Nosh is cutting the price of the Cow & Gate brand milk to $2 per two litres – a 55% reduction from the normal retail price at Nosh stores.

Fonterra and farmers have been criticised for the relatively high price of milk on domestic markets but most of the costs which contribute to the retail price happens between the farm gate and consumers.

If Nosh is able to cut its price by more than 50% then either it has been charging far too much or it is prepared to use it as a loss leader.

Either way, milk will be cheaper in some outlets. Nosh has fired what could be the first shot in a milk war and other retailers will almost certainly retaliate to the benefit of consumers.

In Australia that has put a lot of pressure on farm-gate prices. But domestic supply takes such a small proportion of the New Zealand dairy production farmers here are much less likely to be caught in the crossfire between retailers.


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