NZ Industry Encourages Milk Price War

NEW ZEALAND - Reports that Pak ‘n’ Save (a NZ supermarket) has joined boutique supermarket Nosh in selling milk for an equivalent price of one dollar a litre, supports Federated Farmers view that attention needs to focus on supermarket margins.

8 February 2012

2 minute read

Oceania

Only yesterday, Nosh said: "We are lowering the price of milk to raise awareness of the issue of high milk prices in New Zealand."

The company dropped the price of its Cow & Gate Milk by more than half to $2 for two litres.

Nosh founder and director Clinton Beuvink says milk is a basic household commodity and should be available to all New Zealand consumers, not just those who can afford it.

“Can I applaud Nosh for kicking off a supermarket price war for fresh milk in one location at least,” says Willy Leferink, Federated Farmers Dairy chairperson.

“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 which Coles is spending a lot of money each week underwriting.

“But if you go to another New World in Wellington that same bottle will set you back $3.65. That’s not only 22 per cent 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.