Australian Supermarkets Choose To Defend Consumer Choice In $1 Milk Wars

More consumers are choosing to support dairyfarmers by ignoring $1-a-litre supermarket own brand milk, according to the retail giants at an inquiry into farmgate milk prices.

Representatives from Coles, Woolworths and processors Murray Goulburn and Fonterra appeared at a parliamentary inquiry precipitated by Senators Jacqui Lambie and Nick Xenophon amid calls for a 50c-a-litre emergency milk levy.

The dairy debate was triggered by retrospective cuts to milk farmgate prices by Murray Goulburn and Fonterra in February and May this year.

Coles has about 70 types of milk on its shelves and its general manager of dairy Charlotte Rhodes said consumers have been buying around 40 per cent Coles-branded milk and the rest going to proprietary brands.

“But this has changed substantially since the announcements in May so we have been seeing more customers actually buying more proprietary brands and less Coles brand,” she said.

Woolworths head of buying Steve Donohue said that for many budget customers, $1-a-litre milk was a household staple.

But as consumer demand changed “in reaction to recent events”, the supermarket increased shelf space for the products consumers wanted, he said.

Farmers’ Own milk – a more expensive milk for which farmers are paid a premium farmgate price – was introduced in 2013 to counter bad publicity over the impact of the milk wars on dairyfarmers.

He said the brand had been a costly one for many years but Woolworths had persevered because “it was the right thing to do”.

The Farmers Own two-litre bottles of milk cost consumers between $2.99 and $3.30, compared with the $2 two-litre own brand milk, reflecting the higher costs of farmer production in states such as Queensland.

He said Woolworths was working with farmers “right now” to expand the Farmers’ Own brand in to different dairy products.

Available in five states, Mr Donohue said the brand gave farmers transparency from farmgate to shelf, a long-term contract, a closer relationship with customers, and a higher price for a higher-quality product.

“That being said, it represents a risk for Woolworths because it is obliged to take the full volume of milk from farmers and if it is not sold under the Farmers Own label it must be sold back into the market at a lower price,” Mr Donohue said.

Mr Donohue said it was important to understand there was no one factor – including supermarkets’ $1 milk – that was responsible for the state of the dairy industry.

“Woolworths own brand milk range accounts for just 3.5 per cent of the total milk production,” he said.

“In other words, 96 per cent of Australia’s milk production goes into other products.”

By: Fleur Anderson