Supermarkets are selling milk at unnecessarily low prices, new research suggests, with the ongoing supermarket price war failing to boost volume sales of milk or capture the imagination of consumers.
Despite milk having become a key weapon in the price war, a survey of 1,270 milk drinkers by Mintel found 51% of consumers would actually be prepared to pay more than £1 for four pints. On average, shoppers are willing pay an average of £1.28 for a bottle of this size.
It comes as Morrisons last week cut the price of its four-pinters from £1 to 89, following the likes of Asda and Aldi.
Mintel also claimed that predicted retail value sales of white milk had declined by 5%, from £3.49 billion in 2013 to an estimated £3.34 billion, in 2014, but volume sales had stagnated during the same period at 5.11 billion litres.
“Value has been torn out of the UK milk market in recent years as a result of the grocery retailer price wars,” said Mintel senior analyst Richard Ford, “and we think these results should cause retailers to think about their milk pricing strategies a little bit more.”
One option could be dividing milk ranges into economy and premium tiers. The research found 49% of consumers believed supermarkets should offer fresh cow’s milk in their economy ranges.
Just Waitrose and M&S currently offered a bottom-tier own-brand milk range, under the Essential and Simply brands, added Ford. However, he conceded that standard white milk in standard own-brand ranges held no added-value proposition and “makese it hard for grocers to develop an economy-tier variant”.
Despite a fall in value sales of white milk, Mintel’s research also found pockets of strong growth within the category.
Value sales of fresh lactose-free milk rose by 18% in the past year from £22 million in 2013 to an estimated £26m in 2014, while sales of fresh dairy alternatives such as Alpro rose by 31%, from £48m in 2013 to an estimated £63 million in 2014.
These products, and others such as fortified milk and milk from grass-fed cows could help operators build value back into the market, added Ford. “There is scope for operators to move away from the relentless price cuts in the milk industry without alienating shoppers.”
While welcoming the sentiments of consumers who said they would pay more for milk, one dairy industry expert warned that the supermarkets had “no alternative but to match each other on price, and even if 60 or 70% said they would pay more, it left a significant proportion which wanted milk as cheaply as possible”.
“It’s clear that these price cuts don’t do anything for consumption,” said David Handley, chairman of protest group Farmers for Action. “The supermarkets are doing this to drive footfall but milk has been devalued to such an extent that there is none left.”
With market conditions driving farmers out of business and Handley himself set to sell up in the next few weeks, he urged supermarkets to push up prices. “Consumers want UK milk, but it needs to be sold at a sustainable price, otherwise there won’t be any milk industry.”
But the British Retail Consortium said low milk prices were good news for all involved. ”It’s great to see the level of support for dairy farmers that is shared by retailers,” said a spokeswoman. ”Their investment in their supply chains to ensure farmers get a sustainable price means consumers don’t need to worry about paying more. In fact retailers are ensuring farmers get a good price and consumers get great value British dairy products.’
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