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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