The supermarket chain cut the price of four pints of milk from £1.53 to £1.25 on Thursday last week, after writing to home secretary Theresa May committing not to sell alcohol below the cost of duty plus VAT.
Asda's "moo-ve", as it dubbed it, sparked an immediate price war, with Tesco reducing the price of its Creamfields discount brand from 90p to 50p for two litres last Friday, and from £1.35 to 75p for three litres. Sainsbury's followed on Saturday, selling four pints of 1% fat milk for £1 topped by Morrisons, which ran a 50p promotion on the same line tagged as 'Britain's cheapest milk?'
With Asda confirming the new milk price was now permanent, milk producers were waiting to see if the summer sale became a permanent feature of the supermarket price wars, but the NFU warned that it sent out the wrong signals.
While Asda claimed the promotion would be self-funded, "the danger with these promotions is that the primary producer ends up funding them", said NFU Dairy Board chairman Mansel Raymond. "Retailers cut their margins for a short period. In time it will filter down."
It was disappointing that retailers had to resort to such tactics when some had been beginning to build positive relationships with farmers, added NFU vice president Gwyn Jones. "Whether they're absorbing costs or not, by lowering the price it'll certainly put pressure on the market."
But Asda's tactical switch in April it was selling 24 cans of Budweiser for £9 was praised by responsible drinking groups and booze suppliers for shifting the focus away from alcohol. Molson Coors "wholeheartedly" supported Asda's move, said Mark Hunter, CEO of Molson Coors UK & Ireland. "It's a bold move and one we have been calling for, so we're pleased to see a major supermarket tackling responsible drinking."
A Wine and Spirit Trade Association spokesman said: "Clearly there has been concern about price. Asda's announcement reflects its intention to address that and we concur."
Drinkaware chief executive Chris Sorek added: "It is good to see Asda recognising the role [it can play] in improving the alcohol culture in the UK."
But Morrisons accused Asda of making political capital out of its belated move to tackle below-cost booze. "We don't see a link between the two and are surprised to see anyone else doing so."
Iceland has been selling four pints of milk for £1.10. The Co-op said it had not introduced any promotions but was "keeping a watching brief on the situation".
How the price of milk stacks up
Asda Semi/skimmed - 31.25 pence/pint
Morrisons 1% fat milk - 12.5 pence/pint
Sainsbury's 1% fat milk - 25 pence/pint
Tesco Creamfields - 14.29 pence/pint