Foodstuffs scotches talk of milk price war, labels Nosh $1-a-litre offer ‘a gimmick’

By Hannah Lynch

Feb. 7 (BusinessDesk) – Foodstuffs, the supermarket cooperative with about half the New Zealand market, has scotched reports its Pak ‘n’ Save stores have embarked on an Australian-style price war for milk in response to a rival’s $1/litre promotion.

Customers have been flocking to Auckland-based boutique supermarket chain, Nosh, to buy its Cow & Gate milk at $2 for two litres, a 55 percent discount. Nosh said the price cut, which runs until the end of the month, was to “raise awareness of the issue of high milk prices in New Zealand.”

“Nosh’s price drop on milk is a great gimmick designed to drive customers into a store where the majority of products are significantly more expensive than your average supermarket,” said Rob Chemaly, general manager retail at Foodstuffs Auckland. “We don’t believe this type of price discounting is sustainable.”

Chemaly denied reports that a Pak ‘n’ Save store in the Waikato had already lowered prices in response to Nosh but said supermarket owners could set their own prices “and it is possible some stores may choose to offer further discounts.”

In Australia, angry dairy farmers have demanded a Senate inquiry after supermarket giants Coles and Woolworths slashed the price of milk by 33 percent to A$1 a litre, squeezing payments for raw milk and costing farms in New South Wales alone some $15 million last year.

In New Zealand, where there’s a parliamentary inquiry into what are seen as high milk prices and criticism of Fonterra Cooperative Group’s role in pricing, Federated Farmers has welcomed the prospect of a retail price war, saying that’s where the blame for high prices should lie.

“Frankly, Nosh is doing more to open up competition at the retail end than any narrowly focused inquiry can ever achieve,” said Federated Farmers Dairy chairman, Willy Leferink.

“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,” he said. “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.”

(BusinessDesk)

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