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So Milk is $1... so what?!

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jbocker

Joined
24 May 2009
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I dont get the 'price war' on milk etc.
What I suspect is the said companies (refuse to name them) are just doing it to gain unpaid media coverage (aka no cost advertising in prime time) as current affair shows bleat out the fact that some company is unleashing cheap milk.
IMO It really is a just a marketing ploy where they get their company sprawled over the TV screen for several minutes rather than pay a fortune for 30sec advertising time slot.

Makes me go to another store and pay the price. So what for saving a $1 or whatever.

These companies understand that Current Affairs programs are desperate and will settle for crappy mud raking 'news' items.
 
Re: So Milk is $1.. so what!!

Around here the dairy farmers are very worried, many will go to the wall unless they get a better price.

Commercially, if local dairying ceases to exist, how long will milk stay at $1.
 
Re: So Milk is $1.. so what!!

I would sincerely hope the farmers are still getting a fair price, and the supermarket chain are copping the loss for the sake of their 'price war' (advertising). But sadly I would think the farmer is having to fund their campaign.
Making it all the more reason I will buy my milk elsewhere.

I remember many years ago a major fast food chain were forcing potato farmers in Tasmania (i think) to grow a square breed of potatoes that were more expensive to grow and then screwed the farmer right down on price, leaving them with very little margin. The potatoes were easier to make into fries in case you wondering. Not sure how the farmers eventually fared.
 
Re: So Milk is $1.. so what!!

It is up to the farmers to act collectively like they used to.
If they let the big Supermarkets pick them off one by one and become price takers it is their fault.

For some of them, their idealogy lets them down.

I did hear though they are not suffering under this $1 deal but they are worried they might suffer in future if it continues.

My uncle (in law) is a large farmer and he said that Woolworths in particular is ruthless at keeping down meat prices for farmers. They deliberately distort the market.
 
Re: So Milk is $1.. so what!!

Logique said:
Around here the dairy farmers are very worried, many will go to the wall unless they get a better price.

Commercially, if local dairying ceases to exist, how long will milk stay at $1.
Click to expand...

The Coles hype says it's down and it "will stay down".
 
Coles has done this in its extended attempts to pull marketshare from Woolworths. The 'Staying Down' campaign has been quite successful, with Coles growth of 6.7% vs. Woolworths 4.5%ish.

One year ago Coles was pulling 3.5% whilst Woolworths circa 5%. Woolworths attempts to match Coles pricing has resulted in reduced profits for Woolworths, iirc attributing in their first profit downgrade in 14 years.

The whole reason why these pricing wars are happening is to consolidate marketshare, and it very much seems to be working.
 
jbocker: Very likely to be Tasmania. The potato farmers here have been copping it rough for some time. Simplot and McCain both have operations in Tasmania. Farmers are to limited by contracts and the contract makers have ways of not buying the amount the farmer is required to grow.

The milk war highlights what happens when much of the marketplace is concentrated. Not only the supermarkets controlling retail pricing and shelf price but controlling suppliers which flows back on to milk processors of which there are far fewer now. The farmer doesn't have much say on pricing. Landline had stories last year about it. Tasmania has had a lot of issues with two dominant milk processors control input and output pricing.

In both cases of potatoes and milk the farmer has a choice of supplying or not supplying but if they don't supply a major they have a harder time managing to be sure of their futures for planning but also other sales avenues. Various market segments have finite capacity to absorb product. You can't expect a ten fold increase in supply at a farmers market to be reliably sold each week.

Also remember some milk producers add permeate to milk. Some don't. One of them is probably the largest producer for retail market - at least in Victoria and Tasmania.

A Tasmanian company has noticed sales have dropped through the supermarkets. Supermarkets first reduced their shelf space. Consumers that desired the product have asked the milk processor and also supermarket why they can't always find the product on the shelves. Disappointing for a processor less than 10 km from Woolworths to find customers unable to buy their product there.

At what cost are there savings to consumers? Think about how some people moan about the general lower quality of many products and deride made in China. A race to the bottom.

Knobby22: Where else can the farmers go? Markets are being consolidated and giving less options. Supermarkets have so much volume it's hard for suppliers and farmers to move away from them.
 
boofhead said:
jbocker:
Knobby22: Where else can the farmers go? Markets are being consolidated and giving less options. Supermarkets have so much volume it's hard for suppliers and farmers to move away from them.
Click to expand...

You make good points.
The best solution would be to break up Coles and Woolworths as they have become monopolists but what politician will have the guts to do that?
 
Then you would have to break up a whole host of other monopolies while you're at it.

Marketshare between the companies is circa 30% coles, 40% Woolworths, 30% independents. Dairy product manufacturers is dominated by either Parmalat or National Foods. Soft Drink: Coca Cola and Schweppes, Confectionary: Mars, Nestle, Cadbury. Pre processed meat: Primo & Don. Sauces: Mars.

Thats just some of the things I can think off of the top of my head. The world is full of these monopolies, especially when you enter into the food industry. To pick on the end retailers who sway between holding rough thirds (Coles is gaining marketshare even when they sold a large amount of stores to independent chain FoodWorks. So much for trying to kill independents) is daft. Collusion is not present as seen by the bidding wars, and forcing lower prices on suppliers is common for MANY companies, its called a competitive advantage.

The whole point of a capitalist market economy is that it is (generally) self correcting. Sticking your fingers into it doesn't allow it to function correctly. IF dairy suppliers couldn't sustain on this level, there would be drop off's through bankruptcy etc leading to a drop in supply, meaning the retailers would have to re-evaluate their business strategic plan. The cycle continues.

By the way, Milk 'stay down', isn't going to be staying down for that long. Dairy farmers aren't going to disappear, they are just worried that it could go worse. No buck whiners.
 
Knobby22 said:
It is up to the farmers to act collectively like they used to.
Click to expand...

Exactly.

However, farmers by nature dont like to act collectively. They like to act on their own, hence the career path they have chosen (i know because my old man is one).

Unless they can set a price and stick to it (where it covers there costs and gives them anough profit to sustain a good lifestyle), the buyers will always dictate to them. Problem is, there is always someone who undercuts the other farmers who do try and set a price.

Tasmania was a relatively unique situation where all the farms/farmers are in a relatively concentrated area.
 
Pretty sure cheap milk is a good thing. $1/L beer next please!
Mind you I don't buy that coles stuff anyway, I am a strictly 'dairy farmers' milk man. Tastes like real milk.
Logique said:
Around here the dairy farmers are very worried, many will go to the wall unless they get a better price.
Commercially, if local dairying ceases to exist, how long will milk stay at $1.
Click to expand...
I am pretty sure the $1 milk is a 'loss-leader', in retail-speak. That is, it is a product sold at a loss to entice customers, since customers do not visit a supermarket purely for milk. Once they are there, they will buy other stuff.
Knobby22 said:
You make good points.
The best solution would be to break up Coles and Woolworths as they have become monopolists but what politician will have the guts to do that?
Click to expand...
<shudder>
 
jbocker said:
I dont get the 'price war' on milk etc.

....
Click to expand...

I might understand it incorrectly, but to me it is “price squeeze”

Because Farmers pay for this price reduction and at 2 cents profit per 1 litre does not leave much room for anything.

It might be enough for few cows to have sore t1ts to make farmer rut at loss!
 
Happy said:
I might understand it incorrectly, but to me it is “price squeeze” ...
It might be enough for few cows to have sore t1ts to make farmer rut at loss!
Click to expand...

And a good squeeze might be all it takes to give a cow sore teats!


Sorry! Udderly silly, couldn't resist!
 
tothemax6 said:
Pretty sure cheap milk is a good thing. $1/L beer next please!
Mind you I don't buy that coles stuff anyway, I am a strictly 'dairy farmers' milk man. Tastes like real milk.
Click to expand...

Oh Lulz. BTW, Coles milk is Rebranded 'Dairy Farmers' milk.
 
inq said:
Oh Lulz. BTW, Coles milk is Rebranded 'Dairy Farmers' milk.
Click to expand...
Are you sure about that?
Since this price war started, I've heard many radio discussions about it.

Various dairy farmers have contributed the fact that the own brand milk is absolutely not the same as the branded milk and in fact has up to 12% of a compound known as "Permeate" added to give it the taste of real milk.
This stuff is apparently very cheap.

The other factor is that Coles and Woolworths can at this stage at least legitimately claim their reduction in price is not hurting farmers because it's the distributor who is actually wearing the reduction. Maybe the supermarkets are also taking a slight loss on the loss leader principle.

But sooner or later you'd have to think the distributors (middle men) are going to extract their pound of flesh and the dairy farmers will suffer accordingly.

Doesn't matter to me personally because I never buy milk, but it's an essential purchase for most households who are clearly being influenced by the low prices.

I find it a bit sad, however, that we are so into short term gain that we ignore the rights of dairy farmers to get a reasonable price for their product.
 
I sure hope we don't see a world where we have no milk producers and no idea of where our milk comes from.
I would pay more if it helped small farmers stay in business.

I agree the farmers need to band together and form a co-operative.
 

Yep, same stuff. I see it in the industry that I work.

Milk permeate was designed to create low-fat skim milk, it is a membrane process which allows the separation of the 'good milk' lactose, calcium etc. from the fat content.

People arguing that that Coles milk has higher permeate content are suggesting that it is lower fat content... If you compare content between Coles low fat to Pura low fat, the content is the same, fat, calcium etc.
 
Julia said:
I find it a bit sad, however, that we are so into short term gain that we ignore the rights of dairy farmers to get a reasonable price for their product.
Click to expand...

Its basic capitalism, if you keep allowing your margins to be eroded, of course your buys are going to try and squeeze you. At some point you either have to stand up and say enough, or go broke.

It's Snake Pliskin said:
I agree the farmers need to band together and form a co-operative.
Click to expand...

Indeed
 
alot of people who think it's alright are not familiar with a 'price ceiling' and it's implications.

It is basically the corporate equivalent of government price controls but the difference is the government won't subsidize the milk farmers so hence they will go broke and everyone is worst off.
 
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