Milk price war hits the small guys
THE days of taking a stroll to the corner shop for milk are changing and the impact of the milk pricing war on local general stores will be seen in the coming months.
The downward price spiral began around Australia Day when Coles dropped the cost of milk to $1 a litre and Woolworths, Aldi and Franklins quickly followed suit.
Owner of Coffs Harbour’s 5 Star Supermarket Ted Heffernan operated a dairy farm in Bega for 40 years and knows what goes into producing a litre of milk.
He said his store was serviced by two suppliers and looking at the figures for February 2011 compared to February 2010, one supplier was down 20% in sales.
“The next few months will tell a better story but what the big supermarkets are doing will affect small corner shops and convenience stores,” Mr Heffernan said.
“Our generic brands will be especially affected because people come in to buy the generic brand milk and that’s what the big supermarkets have dropped prices on.”
“It hasn’t happened to us yet but a general store owner told me her sales of butter and other items close to the fridge have dropped substantially.
“People who come in for basics like bread and milk buy other items so if they are not buying milk, the sales of other products will drop.”
A Senate inquiry into the milk pricing blitz started today and will examine why the supermarkets have cut prices, how it will impact on healthy competition and what it means for the future of the dairy industry.
“Eventually this is going to affect dairy farmers and in the long-term it will make milk more expensive because of the lack of competition,” he said.
“Something will come out of this Senate inquiry because it’s not right that Coles dictates the price of milk.”
Coles spokesman Jim Cooper said the supermarket had no concerns about reducing the price of milk to $1 a litre.
“We are very comfortable that our policy is giving great value milk to our customers,” he said.
“We’ve set our prices in such a way that we don’t believe the pricing policy will have an adverse impact on the broader dairy industry.”